Business Context and Reporting Period
Company: FIRST MID BANCSHARES, INC. (FMBH)
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: June 30, 2024
Overview: First Mid Bancshares is a bank holding company operating primarily in Illinois, Missouri, Texas, and Wisconsin. The reporting period reflects the integration of the Blackhawk Bancorp acquisition completed in August 2023. The Company operates as a one-segment entity.
Key Financial Metrics
| Metric | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | Change |
|---|---|---|---|
| Net Income | $40.2 million | $35.7 million | +$4.5 million |
| Diluted EPS | $1.68 | $1.74 | -$0.06 |
| Net Interest Income | $112.2 million | $85.6 million | +$26.6 million |
| Net Interest Margin (TE) | 3.30% | 2.89% | +41 bps |
| Total Assets | $7.58 billion | $6.69 billion (Avg) | Stable |
| Total Loans (Net) | $5.48 billion | $5.51 billion (Dec 31, 2023) | -$22.4 million |
| Total Deposits | $6.12 billion | $6.12 billion (Dec 31, 2023) | Stable |
| Stockholders' Equity | $813.6 million | $793.2 million (Dec 31, 2023) | +$20.4 million |
| Cash & Equivalents | $235.5 million | $143.1 million (Dec 31, 2023) | +$92.4 million |
Material Changes vs. Prior Period
- Revenue Growth: Net interest income increased 31.2% year-over-year, driven by higher earning asset yields and the inclusion of Blackhawk Bank assets. Non-interest income rose 11.8% to $46.9 million, primarily due to higher insurance commissions and service charges.
- Expense Increase: Total non-interest expense increased 28.4% to $104.8 million. This was largely attributable to the acquisition of Blackhawk Bank, resulting in higher salaries, occupancy costs, and amortization of intangible assets ($6.8 million vs. $3.0 million in 2023).
- Loan Portfolio: Net loans decreased slightly ($22.4 million) from year-end 2023 due to seasonal paydowns in commercial and industrial loans, partially offset by seasonal increases in agricultural loans.
- Investment Portfolio: Investment securities decreased by $60.7 million from year-end 2023 due to maturities, paydowns, and sales of 17 securities to reinvest in higher-yielding assets.
- Provision for Credit Losses: The provision was $726,000 for the six months ended June 30, 2024, compared to a benefit of ($359,000) in the prior year period. Net charge-offs were $1.09 million.
Outlook, Risks, and Management Commentary
- Capital Position: The Company remains "well-capitalized" under regulatory standards. The Tier 1 capital to risk-weighted assets ratio was 12.65% at June 30, 2024. Total capital to risk-weighted assets was 15.46%.
- Interest Rate Sensitivity: Static GAP analysis indicates the Company is liability-sensitive through the twelve-month horizon. Management notes that future increases in interest rates could adversely affect net interest income.
- Credit Quality: Nonperforming loans totaled $19.1 million (0.34% of loans). The allowance for credit losses to nonperforming loans ratio is 358%. Management highlights concentrations in agriculture ($601.6 million) and commercial real estate ($2.4 billion), noting risks related to commodity prices and travel demand for hotel loans.
- Liquidity: Liquidity is considered sufficient. The Company holds $235.5 million in cash and equivalents and has access to over $1.6 billion in additional FHLB advances and $120 million in federal fund lines.
- Unusual Items: The effective tax rate increased to 25.0% from 23.0% in the prior year due to a one-time increase in income tax expense related to a change in the State of Illinois income apportionment law.
Investor Verification Checklist
- Acquisition Integration: Verify the realization of synergies and cost savings from the Blackhawk Bancorp merger, specifically regarding the high amortization of intangible assets.
- Commercial Real Estate Exposure: Review the specific performance of the $2.4 billion commercial real estate portfolio, particularly the $223 million in hotel/motel loans and $1.07 billion in non-residential building loans, given interest rate sensitivity.
- Agricultural Concentration: Monitor the $601.6 million agricultural loan portfolio for potential stress due to commodity price volatility or weather events.
- Deposit Cost Trends: Track the cost of interest-bearing deposits, which rose to 2.23% for the six-month period, to assess pressure on net interest margin.
- Securities Portfolio: Confirm the impact of unrealized losses on available-for-sale securities (approx. $200 million gross unrealized losses) on regulatory capital and liquidity.