Business Context and Reporting Period
Company: First Mid Bancshares, Inc. (FMBH)
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: September 30, 2024
Overview: First Mid Bancshares is a bank holding company operating primarily in Illinois, Missouri, Texas, and Wisconsin. The company operates as a one-segment entity. The reporting period reflects the integration of the Blackhawk Bancorp acquisition (closed August 2023) and the acquisition of Mid Rivers Insurance Group, Inc. (MRIG) in Q3 2024.
Key Financial Metrics
| Metric | Q3 2024 (Three Months) | Q3 2023 (Three Months) | YTD 2024 (Nine Months) | YTD 2023 (Nine Months) |
|---|---|---|---|---|
| Net Income | $19.5 million | $15.1 million | $59.7 million | $50.9 million |
| Diluted EPS | $0.81 | $0.68 | $2.49 | $2.40 |
| Net Interest Income | $57.5 million | $50.4 million | $169.8 million | $136.0 million |
| Net Interest Margin (TE) | 3.35% | 3.06% | 3.32% | 2.95% |
| Provision for Credit Losses | $1.3 million | $5.9 million | $2.0 million | $5.6 million |
| Total Assets | $7.56 billion | $7.28 billion (Avg) | $7.56 billion | $6.89 billion (Avg) |
| Total Loans (Net) | $5.54 billion | $5.51 billion (Dec 2023) | $5.54 billion | $5.51 billion (Dec 2023) |
| Total Deposits | $6.09 billion | $6.12 billion (Dec 2023) | $6.09 billion | $6.12 billion (Dec 2023) |
| Stockholders' Equity | $858.5 million | $793.2 million (Dec 2023) | $858.5 million | $793.2 million (Dec 2023) |
| Cash & Equivalents | $164.2 million | $143.1 million (Dec 2023) | $164.2 million | $143.1 million (Dec 2023) |
Material Changes vs. Prior Period
- Profitability Growth: Net income increased 28.9% year-over-year for the quarter and 17.4% year-over-year for the nine-month period. This was driven primarily by a $7.1 million increase in net interest income and a significant reduction in the provision for credit losses.
- Net Interest Margin Expansion: The tax-equivalent net interest margin expanded to 3.32% for the nine months ended September 30, 2024, compared to 2.95% in the prior year. This increase was due to higher earning asset yields, partially offset by increased rates on interest-bearing deposits and borrowings.
- Expense Management: Total non-interest expense increased 23.3% year-over-year for the nine-month period, primarily due to the acquisition of Blackhawk Bank (increasing amortization of intangibles and operational scale) and scheduled annual salary increases.
- Asset Composition: Total assets remained relatively flat at $7.56 billion compared to year-end 2023. Cash and cash equivalents increased by $21.1 million, while investment securities decreased by $55.7 million due to sales and maturities.
- Dividends: The company declared cash dividends of $0.24 per share for the quarter, totaling $16.7 million for the nine-month period.
Guidance, Outlook, Risks, and Unusual Items
- Acquisition Activity: The company recorded $6.9 million in goodwill related to the acquisition of Mid Rivers Insurance Group, Inc. (MRIG) in Q3 2024. The Blackhawk Bancorp acquisition continues to contribute to revenue growth.
- Credit Quality: Nonperforming loans decreased to $18.2 million (0.33% of total loans) from $21.3 million in the prior year. Net charge-offs were $1.9 million for the nine months ended September 30, 2024, compared to $0.2 million in the prior year. The allowance for credit losses to nonperforming loans ratio improved to 377%.
- Interest Rate Sensitivity: The company is currently liability-sensitive on a cumulative basis through the twelve-month horizon. Management notes that future increases in interest rates could have an adverse effect on net interest income.
- Concentrations: Significant loan concentrations exist in agriculture ($618.4 million, with $508.2 million in grain farming), lessors of non-residential buildings ($1.1 billion), and hotels/motels ($226.7 million). Management monitors these sectors for risks related to commodity prices, travel demand, and occupancy rates.
- Regulatory Capital: The company remains "well-capitalized" under regulatory standards. Tier 1 capital to risk-weighted assets was 12.70% and total capital to risk-weighted assets was 15.24% as of September 30, 2024.
- Unusual Items: The effective tax rate increased to 24.4% for the nine months ended September 30, 2024, primarily due to a one-time increase in income tax expense resulting from a change in the State of Illinois income apportionment law.
Investor Verification Checklist
- Verify Net Interest Margin Sustainability: Confirm if the 3.32% margin is sustainable given the liability-sensitive gap and potential for rising deposit costs.
- Review Agricultural Exposure: Assess the impact of current commodity prices and weather conditions on the $618.4 million agricultural loan portfolio.
- Monitor Nonperforming Loans: Track the trend of nonperforming loans, specifically in the commercial real estate and hotel sectors, which comprise a significant portion of the portfolio.
- Check Intangible Amortization: Evaluate the impact of ongoing amortization from the Blackhawk and MRIG acquisitions on future earnings.
- Confirm Liquidity Sources: Verify the availability of the $1.6 billion in excess collateral at the Federal Home Loan Bank and the $15 million revolving credit line.