Business Context and Reporting Period
Company: First Mid Bancshares, Inc. (FMBH)
Filing Type: Form 10-Q (Unaudited)
Reporting Period: Quarter ended March 31, 2026
Key Event: The Company completed the acquisition of Two Rivers Financial Group, Inc. on February 28, 2026, significantly expanding its asset base and geographic footprint.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 | Dec 31, 2025 (Balance Sheet) |
|---|---|---|---|
| Net Income | $26.3 million | $22.2 million | N/A |
| Diluted EPS | $1.06 | $0.93 | N/A |
| Total Assets | $9.29 billion | N/A | $7.97 billion |
| Total Loans (Net) | $6.85 billion | N/A | $5.93 billion |
| Total Deposits | $7.55 billion | N/A | $6.40 billion |
| Net Interest Income | $70.8 million | $59.4 million | N/A |
| Net Interest Margin (TE) | 3.78% | 3.60% | N/A |
| Provision for Credit Losses | $2.6 million | $1.7 million | N/A |
| Return on Average Assets | 1.26% | 1.19% | N/A |
| Return on Average Equity | 10.45% | 10.35% | N/A |
Material Changes vs. Prior Period
- Acquisition Impact: The acquisition of Two Rivers Financial Group drove a $1.32 billion increase in total assets and a $1.15 billion increase in total deposits compared to year-end 2025. Net loans increased by $921 million.
- Revenue Growth: Net interest income increased $11.4 million (19.1%) year-over-year, driven by higher earning asset yields and the addition of Two Rivers' loan portfolio. Non-interest income rose 6.3% to $26.4 million, aided by increased insurance commissions and wealth management revenues.
- Expense Increase: Total non-interest expense increased 11.5% to $60.7 million. This was primarily due to higher salaries and benefits (1,335 FTEs vs. 1,194 in Q1 2025), increased occupancy costs, and $2.1 million in acquisition-related integration expenses.
- Asset Quality: Nonperforming loans increased to $44.1 million (0.63% of loans) from $26.6 million in Q1 2025. This increase is largely attributed to the $10.9 million in nonperforming loans acquired from Two Rivers. Net charge-offs were $1.5 million.
Outlook, Risks, and Management Commentary
- Capital Position: The Company remains "well-capitalized" under regulatory standards. Total capital to risk-weighted assets ratio was 15.48%, and Tier 1 capital to risk-weighted assets was 13.57% as of March 31, 2026.
- Liquidity: Liquidity is deemed sufficient, supported by $477 million in cash and cash equivalents, $170 million in overnight federal fund lines, and significant borrowing capacity at the Federal Home Loan Bank (FHLB).
- Interest Rate Sensitivity: The Company is currently liability-sensitive within the 12-month horizon. Management notes that future increases in interest rates could adversely affect net interest income.
- Concentrations: Significant loan concentrations exist in "Other grain farming" ($646 million) and "Lessors of non-residential buildings" ($1.29 billion). Management monitors these sectors closely given economic dependencies.
- Unrealized Losses: Available-for-sale securities held $150.5 million in gross unrealized losses, primarily due to interest rate changes. Management does not intend to sell these securities before recovery.
Investor Verification Checklist
- Integration Progress: Verify the timeline and cost efficiency of merging Two Rivers Bank operations into First Mid Bank, scheduled for June 2026.
- Acquired Asset Quality: Monitor the performance of the $10.9 million in nonperforming loans acquired from Two Rivers to ensure they do not deteriorate further.
- Deposit Stability: Assess the retention of the $1.04 billion in deposits acquired from Two Rivers, particularly time deposits maturing within the next 12 months.
- Expense Run Rate: Confirm whether the $2.1 million in one-time acquisition costs and elevated integration expenses are temporary or indicative of a higher permanent cost base.
- Interest Rate Exposure: Review the Asset Liability Committee (ALCO) strategies to mitigate the liability-sensitive gap identified in the 12-month horizon.