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 (Tax-Effected) | 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. This increase is primarily attributed to the full-year impact of the Blackhawk Bank acquisition (additional employees and locations) and increased 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, driven by 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 financial results.
Risks and Contingencies:
- 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 currently liability-sensitive within the 12-month horizon. A sustained increase in interest rates could adversely affect net interest income, while a decrease could compress margins.
- Operational Risk: Exposure to cybersecurity threats and operational failures, though management reports robust controls and no material incidents in 2024.
- Goodwill Impairment: Management performed an annual goodwill impairment test as of September 30, 2024, concluding no impairment was necessary. However, a significant decline in stock price could trigger future impairment charges.
Key Facts for Investor Verification
- Capital Adequacy: Verify the Company's Tier 1 Leverage Ratio of 10.33% and Total Risk-Based Capital Ratio of 15.37% to confirm compliance with "well-capitalized" status.
- Loan Concentrations: Review the specific exposure to "Other grain farming" ($507.6 million) and "Lessors of non-residential buildings" ($1.05 billion), which exceed 25% of total risk-based capital.
- Acquisition Integration: Assess the ongoing integration costs and synergies from the Blackhawk Bancorp acquisition, which drove the majority of expense growth in 2024.
- Nonperforming Assets: Monitor the trend of nonperforming loans, which increased by nearly 50% year-over-year, and the adequacy of the allowance for credit losses (1.24% of total loans).
- Dividend Capacity: Note that approximately $74.5 million was available for dividends from the subsidiary bank to the holding company as of year-end 2024.