Business Context and Reporting Period
Company: First Mid Bancshares, Inc. (FMBH)
Reporting Period: Fiscal Year Ended December 31, 2024
Business Overview: A financial holding company operating primarily through its subsidiary, First Mid Bank & Trust, N.A. The Company offers banking, insurance, wealth management, and captive insurance services. Operations are concentrated in Illinois, Missouri, Wisconsin, and Texas.
Recent Acquisitions: The Company completed the acquisition of Blackhawk Bancorp, Inc. in August 2023 (merged December 2023). In 2024, it acquired Mid Rivers Insurance Group, Inc. and Purdum, Gray, Ingledue, Beck, Inc., both merged into First Mid Insurance.
Key Financial Metrics
| Metric | 2024 | 2023 | 2022 |
|---|---|---|---|
| Net Income | $78.9 million | $68.9 million | $73.0 million |
| Diluted EPS | $3.30 | $3.15 | $3.60 |
| Total Assets | $7.52 billion | $7.59 billion | $6.74 billion |
| Net Loans | $5.60 billion | $5.51 billion | $4.77 billion |
| Total Deposits | $6.06 billion | $6.12 billion | $5.26 billion |
| Net Interest Income | $228.7 million | $193.5 million | $184.3 million |
| Non-Interest Income | $96.3 million | $86.8 million | $74.7 million |
| Non-Interest Expense | $215.0 million | $185.7 million | $162.9 million |
| Net Interest Margin (TE) | 3.34% | 3.05% | 3.13% |
| Return on Average Assets | 1.04% | 0.97% | 1.11% |
| Return on Average Equity | 9.67% | 10.10% | 11.38% |
| Allowance for Credit Losses | $70.2 million | $68.7 million | $59.1 million |
| Nonperforming Loans | $29.8 million (0.53% of loans) | $20.1 million (0.36% of loans) | $19.2 million (0.40% of loans) |
Material Changes vs. Prior Period
- Profitability: Net income increased 14.5% to $78.9 million, driven by a 17.9% increase in net interest income and a 10.9% increase in non-interest income.
- Net Interest Margin: Expanded to 3.34% from 3.05% in 2023. This improvement resulted from the repricing of earning assets catching up to the increased cost of funding experienced in the prior year.
- Expense Growth: Non-interest expenses rose 15.7% to $215.0 million, primarily due to the full-year impact of the Blackhawk Bank acquisition (increased staff and locations) and higher compensation costs.
- Asset Quality: Nonperforming loans increased to $29.8 million from $20.1 million. Net charge-offs rose to $4.1 million in 2024 compared to $0.3 million in 2023, reflecting specific charge-offs in commercial real estate and agricultural sectors.
- Deposit Strategy: Total deposits decreased slightly to $6.06 billion as the Company intentionally reduced brokered and purchased CDs to lower the cost of funds.
Guidance, Outlook, and Risks
Management Commentary: Management maintains a strong capital position, with all regulatory ratios exceeding "well-capitalized" standards. The Company continues to focus on organic growth and strategic acquisitions that align with its culture. The full-year impact of the Blackhawk acquisition is now fully realized in the financials.
Key Risks:
- Credit Risk: Significant exposure to commercial real estate ($2.4 billion) and agriculture ($630.6 million). A decline in real estate values or agricultural commodity prices could increase credit losses.
- Interest Rate Risk: The Company is liability-sensitive within the 12-month horizon. A sustained increase in interest rates could adversely affect net interest income, though the margin has recently improved.
- Operational Risk: Exposure to cybersecurity threats and potential goodwill impairment if stock prices decline significantly.
- Concentration Risk: Loan concentrations in "Other grain farming" (8.95% of risk-based capital) and "Lessors of non-residential buildings" (18.50% of risk-based capital) exceed 25% of total risk-based capital thresholds.
Investor Verification Checklist
- Asset Quality Trends: Verify the trajectory of nonperforming loans and net charge-offs, particularly in the agricultural and commercial real estate sectors, given the increase in 2024.
- Deposit Stability: Monitor the composition of deposits to ensure the reduction in brokered CDs does not lead to liquidity constraints or higher funding costs in the future.
- Interest Rate Sensitivity: Review the Asset Liability Management Committee (ALCO) reports regarding the liability-sensitive gap and potential impact of further rate hikes on net interest income.
- Acquisition Integration: Assess the ongoing integration costs and synergies realized from the Blackhawk Bancorp and insurance agency acquisitions.
- Capital Ratios: Confirm that regulatory capital ratios (Tier 1 Leverage, CET1) remain well above the "well-capitalized" thresholds despite potential future charge-offs.