Financial Performance - Net income for the nine months ended September 30, 2025, was $68.1 million, an increase of 14.1% from $59.7 million in the same period of 2024[132] - Diluted net income per common share rose to $2.84 for the nine months ended September 30, 2025, compared to $2.49 for the same period in 2024[132] - Total non-interest income increased by $1.4 million or 2.1% to $71.4 million for the nine months ended September 30, 2025[134] - Net interest income increased by $19.9 million, or 11.5%, to $191.9 million for the nine months ended September 30, 2025, compared to $172.1 million for the same period in 2024[149] - The effective tax rate decreased to 21.8% for the nine months ended September 30, 2025, down from 24.4% in the same period of 2024[157] Asset and Loan Growth - Total assets increased to $7.8 billion as of September 30, 2025, up from $7.5 billion at December 31, 2024, with net loan balances rising to $5.7 billion[132] - Average loans increased by $170.0 million, or 3.1%, compared to the same period in 2024[150] - As of September 30, 2025, total loans outstanding amounted to $5.824 billion, with $1.220 billion maturing in one year or less, $2.749 billion maturing over one to five years, and $1.855 billion maturing over five years[165] - The loan portfolio increased by $151.6 million, or 2.7%, driven by growth in construction and land development loans[162] Credit Quality and Losses - The provision for credit losses was $7.6 million for the nine months ended September 30, 2025, compared to $2.0 million for the same period in 2024[137] - Total nonperforming loans increased to $22.2 million at September 30, 2025, from $18.2 million at September 30, 2024[136] - Nonperforming loans increased to $22.2 million as of September 30, 2025, from $18.2 million in 2024[151] - The net charge-offs for the first nine months of 2025 were $4.8 million, significantly higher than $1.9 million in the same period of 2024, indicating a 152.63% increase[180] - The allowance for credit losses is based on management's estimate of probable losses, with a focus on a disciplined credit review process and economic factors affecting borrowers[173][174] Expenses and Income - Total non-interest expense rose by $7.7 million or 4.8% to $166.4 million for the nine months ended September 30, 2025, primarily due to salary increases and incentive compensation[135] - Total other income for the nine months ended September 30, 2025, was $71.366 million, a 2.1% increase from $69.923 million in 2024[152] - Salaries and employee benefits increased by $2.0 million, or 6.4%, primarily due to annual raises and increased incentive compensation accruals[159] Capital and Equity - The Company's Tier 1 capital to risk-weighted assets ratio was 13.53% at September 30, 2025, compared to 12.70% at September 30, 2024[138] - As of September 30, 2025, the Company's stockholders' equity increased by $85.8 million or 10.1%, reaching $932.2 million from $846.4 million as of December 31, 2024[199] - The Company believes it met all capital adequacy requirements as of September 30, 2025, according to regulatory standards[200] Deposits and Borrowings - The total average deposits for the nine months ended September 30, 2025, were $6,183.6 million, a slight increase of $40.4 million compared to the average balance for the year ended December 31, 2024[181] - The high month-end balance of total deposits reached $6,289.5 million for the nine months ended September 30, 2025, compared to $6,242.9 million in 2024[182] - The average interest rate on total borrowings at the end of the period was 3.09% as of September 30, 2025, down from 3.30% at the end of 2024[183] Risk Management - The Company aims to maximize its net interest margin while managing interest rate risk, monitored by its asset liability management committee (ALCO)[197] - The static GAP analysis indicated that the Company was liability sensitive through the twelve-month time horizon, suggesting potential adverse effects on net interest income from future interest rate increases[198] - The Company’s interest rate sensitivity position is monitored to maintain a balance between rate-sensitive assets and liabilities, limiting adverse effects from interest rate changes[197] Commitments and Obligations - The Company had a total of $1,702.3 million in significant contractual obligations and other commitments as of September 30, 2025[207] - The Company maintained compliance with existing covenants as of September 30, 2025, and had no balance on its revolving credit agreement of $15.0 million[184] Stock and Shareholder Programs - The Company has a maximum of 1,000,000 shares of common stock that may be issued under the Stock Incentive Plan, with 79,635 restricted stock awards granted in 2025[202] - The Employee Stock Purchase Plan allows eligible employees to purchase shares at a 15% discount, with 149,156 shares issued as of September 30, 2025[203] - The 2025 Repurchase Program authorizes the Company to repurchase up to 1.2 million shares, with approximately $45.5 million remaining capacity as of September 30, 2025[204]

Core Insights - First Mid Bancshares (FMBH) reported quarterly earnings of $0.97 per share, exceeding the Zacks Consensus Estimate of $0.96 per share, and up from $0.83 per share a year ago, representing an earnings surprise of +1.04% [1] - The company posted revenues of $89.27 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 1.50%, compared to $80.57 million in the same quarter last year [2] - The stock has underperformed the market, losing about 1.6% since the beginning of the year, while the S&P 500 gained 17.2% [3] Earnings Performance - Over the last four quarters, First Mid Bancshares has surpassed consensus EPS estimates four times [2] - The company has topped consensus revenue estimates three times over the last four quarters [2] - The current consensus EPS estimate for the upcoming quarter is $0.99 on revenues of $89.05 million, and for the current fiscal year, it is $3.88 on revenues of $348.95 million [7] Market Outlook - The earnings outlook and estimate revisions will significantly influence the stock's immediate price movement [3][4] - The estimate revisions trend for First Mid Bancshares was unfavorable prior to the earnings release, resulting in a Zacks Rank 4 (Sell) for the stock, indicating expected underperformance in the near future [6] - The Zacks Industry Rank for Banks - Northeast is currently in the top 14% of over 250 Zacks industries, suggesting a favorable industry outlook [8]

Financial Performance - Net interest income for Q3 2025 was $66.4 million, an increase of $2.5 million, or 3.9% from Q2 2025[5] - Quarterly net income was $22.5 million, or $0.94 diluted EPS, with adjusted net income at $23.3 million, or $0.97 diluted EPS[9] - Net income for Q3 2025 was $22,462 thousand, up from $19,482 thousand in Q3 2024, representing a growth of 10.15%[32] - Basic earnings per share increased to $0.94 in Q3 2025, compared to $0.81 in Q3 2024, a rise of 16.05%[32] - Net income for the quarter was $22,462 thousand, a decrease from $23,438 thousand in the previous quarter, representing a decline of 4.16%[35] Loans and Deposits - Total loans reached $5.82 billion, up $57.0 million, or 1.0% from the previous quarter[8] - Total deposits increased to $6.29 billion, a rise of $99.3 million, or 1.6% from the prior quarter[12] - Net loans rose to $5,751,113 thousand in 2025, compared to $5,602,280 thousand in 2024, marking an increase of 2.65%[29] - Total deposits reached $6,289,543 thousand in 2025, up from $6,057,096 thousand in 2024, reflecting a growth of 3.83%[29] - Total loans reached $5,824,038 thousand, a growth from $5,766,999 thousand in the previous quarter, representing an increase of 0.99%[36] Interest Income and Expenses - The net interest margin on a tax-equivalent basis was 3.80%, reflecting an increase of 8 basis points from the prior quarter[7] - Net interest income after provision for credit losses was $63,010 thousand for Q3 2025, compared to $56,277 thousand in Q3 2024, an increase of 11.4%[32] - Interest expense on deposits decreased to $25,179 thousand in Q3 2025 from $28,341 thousand in Q3 2024, a decline of 7.63%[32] - Total interest expense increased to $33,639 thousand, up from $30,892 thousand in the previous quarter, reflecting a rise of 5.7%[35] - Net interest income after provision for credit losses was $63,010 thousand, compared to $61,296 thousand in the prior quarter, an increase of 2.8%[35] Non-Interest Income and Expenses - Non-interest income for Q3 2025 was $22.9 million, a decrease from $23.6 million in the prior quarter[13] - Total non-interest income for the nine months ended September 30, 2025, was $71,366 thousand, compared to $69,923 thousand for the same period in 2024, an increase of 2.07%[32] - Non-interest expenses totaled $57.1 million, an increase of $2.3 million from the previous quarter[16] - Total non-interest expense for the nine months ended September 30, 2025, was $166,380 thousand, up from $158,686 thousand in 2024, reflecting a rise of 4.25%[32] - Total non-interest income was $22,909 thousand, down from $23,593 thousand in the previous quarter, a decrease of 2.9%[35] Credit Quality - The allowance for credit losses was $72.9 million, with a ratio of ACL to total loans at 1.25%[11] - Provision for credit losses was $3,353 thousand in Q3 2025, compared to $1,266 thousand in Q3 2024, indicating a significant increase in provisions[32] - Non-performing loans stood at $22,199 thousand, slightly up from $21,895 thousand, indicating a 1.39% increase[36] - The allowance for credit losses to total loans outstanding was 1.25%, up from 1.23% in the previous quarter, showing a slight increase in credit risk management[36] Asset Growth - Total assets increased to $7,830,368 thousand in 2025, up from $7,519,734 thousand in 2024, representing a growth of 4.14%[29] - Total earning assets at the end of the period reached $7,101,811, an increase from $6,924,934 in the previous quarter, reflecting a growth of 2.55%[37] Stockholder Equity - Tangible book value per share increased by 6.0% to $28.21 during the quarter[9] - Book value per common share increased to $38.85, compared to $37.27 in the previous quarter, reflecting a growth of 4.24%[36] - Common stockholder's equity increased to $932,179 from $894,140 in the previous quarter, reflecting a growth of 4.25%[43] Operational Efficiency - Adjusted return on average assets was 1.21%, slightly down from 1.23% in the previous quarter[45] - Adjusted return on average common equity decreased to 10.34% from 10.80% in the prior quarter, a decline of 4.26%[45] - Efficiency ratio (non-GAAP) was reported at 58.75%, an increase from 58.09% in the previous quarter, indicating a decline in operational efficiency[45] Company Developments - The company announced the pending acquisition of Two Rivers Financial Group, Inc., expanding its footprint into Iowa[4] - Full-time equivalent employees decreased to 1,178 from 1,190 in the previous quarter, a reduction of 1.01%[37] - The market price of stock was $37.88, slightly up from $37.49 in the previous quarter, indicating a 1.04% increase[36]

Core Insights - First Mid Bancshares, Inc. reported solid financial performance for Q3 2025, with growth in net interest margin, loans, and deposits, alongside strategic operational changes [3][10]. Financial Performance - Net interest income for Q3 2025 was $66.4 million, up $2.5 million or 3.9% from Q2 2025, and increased by $8.8 million or 15.3% compared to Q3 2024 [5][6]. - The net interest margin was 3.80%, an increase of 8 basis points from the previous quarter, driven by higher yields on earning assets [7]. - Quarterly net income was $22.5 million, or $0.94 diluted EPS, with adjusted net income of $23.3 million, or $0.97 diluted EPS [10]. Loan and Deposit Growth - Total loans reached $5.82 billion, a quarterly increase of $57.0 million or 1.0%, and a year-over-year increase of $209.4 million or 3.7% [8][9]. - Total deposits were $6.29 billion, up $99.3 million or 1.6% from the prior quarter [12]. Asset Quality - The allowance for credit losses (ACL) was $72.9 million, with an ACL to total loans ratio of 1.25% [11]. - The ratio of non-performing loans to total loans was stable at 0.38%, with non-performing assets to total assets decreasing to 0.30% [11]. Non-Interest Income and Expenses - Non-interest income for Q3 2025 was $22.9 million, a slight decrease from the prior quarter, primarily due to losses on the sale of securities [13][14]. - Non-interest expenses totaled $57.1 million, an increase from $54.8 million in the previous quarter, driven by higher salaries and one-time costs related to branch closures [16][17]. Strategic Initiatives - The company completed the conversion of its core operating system and closed 8 full-service branches to enhance efficiency and align with digital banking trends [3][10]. - A pending acquisition of Two Rivers Financial Group, Inc. was announced, aimed at diversifying the company's footprint into Iowa [4][10]. Capital and Dividend - Tangible book value per share increased by 6.0% to $28.21 during the quarter [19]. - The Board of Directors declared a regular dividend of $0.25 per share, payable on December 1, 2025 [19].

Core Viewpoint - First Mid Bancshares, Inc. is set to merge with Two Rivers Financial Group, Inc. in a 100% stock transaction, enhancing First Mid's market presence in Iowa [1][3]. Company Overview - Two Rivers Financial Group, Inc. operates 14 branches in central and southeastern Iowa, with total assets of approximately $1.1 billion, $901 million in loans, and $988 million in deposits as of September 30, 2025 [2]. - First Mid Bancshares, Inc. is a community-focused organization with $7.8 billion in assets, providing a range of financial services across multiple states [11]. Transaction Details - Under the merger agreement, Two Rivers shareholders will receive 1.225 shares of First Mid common stock for each share of Two Rivers common stock, valuing the transaction at approximately $94.1 million based on First Mid's share price of $36.80 [3]. - The transaction is expected to be 12.3% accretive to First Mid's earnings per share by 2027, with tangible book value dilution expected to be recovered in 2.1 years [4]. Strategic Rationale - The merger is aimed at expanding First Mid's geographic footprint and enhancing its commitment to community banking [5][6]. - First Mid anticipates achieving cost savings of approximately 27% of Two Rivers' noninterest expenses, with potential revenue synergies not yet included in the estimates [4]. Leadership and Governance - The transaction has received unanimous approval from both companies' boards and is expected to close in the first quarter of 2026, pending regulatory and shareholder approvals [8]. - Shane Zimmerman, CEO of Two Rivers Bank & Trust, will join First Mid as an Executive Vice President and Divisional President post-merger [7]. Advisory and Legal Support - D.A. Davidson & Co. served as the exclusive financial advisor to Two Rivers, while Keefe, Bruyette & Woods, Inc. acted as the financial advisor for First Mid [9].

[FORM 10-Q Filing Information](index=1&type=section&id=FORM%2010-Q%20Filing%20Information) This section details First Mid Bancshares, Inc.'s Form 10-Q filing information, including its large accelerated filer status and common shares outstanding as of August 8, 2025 - First Mid Bancshares, Inc. filed its Quarterly Report on Form 10-Q for the period ended June 30, 2025, indicating its status as a **large accelerated filer**[2](index=2&type=chunk)[3](index=3&type=chunk) FORM 10-Q Filing Details | Indicator | Value | | :--- | :--- | | Commission file number | 001-36434 | | Trading Symbol | FMBH | | Exchange | NASDAQ Global Market | | Filer Status | Large accelerated filer | | Common shares outstanding (as of Aug 8, 2025) | 23,997,367 | | Par value per share | $4.00 | [PART I - FINANCIAL INFORMATION](index=2&type=section&id=PART%20I) [ITEM 1. FINANCIAL STATEMENTS](index=2&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents First Mid Bancshares, Inc.'s unaudited condensed consolidated financial statements for the quarter ended June 30, 2025, including balance sheets, income statements, and cash flow statements, along with accompanying notes [Condensed Consolidated Balance Sheets](index=2&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the Company's financial position, detailing assets, liabilities, and stockholders' equity as of June 30, 2025, and December 31, 2024 Condensed Consolidated Balance Sheet Highlights (In thousands) | Item | June 30, 2025 | December 31, 2024 | Change (vs. Dec 31, 2024) | | :--- | :--- | :--- | :--- | | Total assets | $7,680,475 | $7,519,734 | +$160,741 | | Cash and cash equivalents | $190,017 | $121,216 | +$68,801 | | Net loans | $5,688,480 | $5,595,666 | +$92,814 | | Total deposits | $6,190,199 | $6,057,096 | +$133,103 | | Total liabilities | $6,786,335 | $6,673,343 | +$112,992 | | Total stockholders' equity | $894,140 | $846,391 | +$47,749 | - The company's total assets increased by **$160.7 million**, driven primarily by increases in cash and cash equivalents and net loans. Total deposits also saw a significant increase of **$133.1 million**[5](index=5&type=chunk) [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) This section presents the Company's financial performance over specific periods, detailing revenues, expenses, and net income for the three and six months ended June 30, 2025 and 2024 Condensed Consolidated Statements of Income Highlights (In thousands, except per share data) | Item | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total interest income | $93,401 | $88,683 | $180,960 | $176,355 | | Total interest expense | $29,538 | $31,918 | $57,688 | $64,120 | | Net interest income | $63,863 | $56,765 | $123,272 | $112,235 | | Provision for credit losses | $2,567 | $1,083 | $4,219 | $726 | | Total other income | $23,593 | $22,422 | $48,457 | $46,900 | | Total other expense | $54,762 | $51,391 | $109,234 | $104,753 | | Net income | $23,438 | $19,745 | $45,609 | $40,248 | | Basic net income per common share | $0.98 | $0.83 | $1.91 | $1.69 | | Diluted net income per common share | $0.98 | $0.82 | $1.90 | $1.68 | - Net income increased by **$3.69 million** (18.7%) for the three months ended June 30, 2025, and by **$5.36 million** (13.3%) for the six months ended June 30, 2025, compared to the same periods in 2024. This was primarily driven by an increase in net interest income and other income, partially offset by higher provision for credit losses and other expenses[6](index=6&type=chunk)[139](index=139&type=chunk) [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This section details the Company's comprehensive income, including net income and other comprehensive income (loss), for the three and six months ended June 30, 2025 and 2024 Condensed Consolidated Statements of Comprehensive Income Highlights (In thousands) | Item | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income | $23,438 | $19,745 | $45,609 | $40,248 | | Other comprehensive income (loss), net of taxes | $4,640 | $669 | $11,673 | $(10,571) | | Comprehensive income | $28,078 | $20,414 | $57,282 | $29,677 | - Comprehensive income significantly increased for both the three and six months ended June 30, 2025, largely due to positive unrealized gains on available-for-sale securities, net of tax, compared to a loss in the prior year period for the six months[7](index=7&type=chunk) [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) This section outlines the changes in the Company's stockholders' equity, including net income, dividends, and other comprehensive income, for the six months ended June 30, 2025 Changes in Stockholders' Equity (Six months ended June 30, 2025, in thousands) | Item | Amount | | :--- | :--- | | Beginning balance (Dec 31, 2024) | $846,391 | | Net income | $45,609 | | Other comprehensive income, net tax | $11,673 | | Cash dividends on common stock | $(11,456) | | Issuance of restricted shares (net of forfeitures) | $2,863 | | Issuance of common shares (2017 SI Plan) | $218 | | Issuance of common shares (ESPP) | $426 | | Deferred compensation | $(3,232) | | Grant of restricted units | $2,070 | | Release of restricted units | $(1,634) | | Vested restricted shares/units compensation expense | $1,212 | | Ending balance (June 30, 2025) | $894,140 | - Total stockholders' equity increased by **$47.7 million** from December 31, 2024, to June 30, 2025, primarily driven by net income and other comprehensive income, partially offset by cash dividends[10](index=10&type=chunk)[205](index=205&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section details the Company's cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2025 and 2024 Condensed Consolidated Statements of Cash Flows Highlights (Six months ended June 30, in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $55,631 | $53,020 | | Net cash provided by (used in) investing activities | $(93,124) | $69,264 | | Net cash provided by (used in) financing activities | $106,294 | $(29,868) | | Increase in cash and cash equivalents | $68,801 | $92,416 | | Cash and cash equivalents at end of period | $190,017 | $235,480 | - For the six months ended June 30, 2025, the company experienced a net increase in cash and cash equivalents of **$68.8 million**, primarily due to strong cash generation from financing activities and operating activities, despite significant cash usage in investing activities[13](index=13&type=chunk)[213](index=213&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanatory notes supporting the condensed consolidated financial statements, offering additional context and disclosures on various financial items [Note 1 - Basis of Accounting and Consolidation](index=11&type=section&id=Note%201%20--%20Basis%20of%20Accounting%20and%20Consolidation) This note outlines the basis for preparing the unaudited condensed consolidated financial statements, confirming the inclusion of all wholly-owned subsidiaries and the elimination of intercompany transactions. It also details the acquisition of Mid Rivers Insurance Group, Inc. and affirms the Company's single segment reporting structure - The Company acquired Mid Rivers Insurance Group, Inc. for **$10.1 million** during the quarter ended September 30, 2024, merging it into First Mid Insurance Group[18](index=18&type=chunk) - The Company operates as a **single segment** for financial reporting, with the Chief Financial and Risk Officer serving as the chief operating decision maker (CODM) who assesses performance based on consolidated results[21](index=21&type=chunk) [Note 2 - Earnings Per Share](index=13&type=section&id=Note%202%20--%20Earnings%20Per%20Share) This note provides the calculation of basic and diluted net income per common share for the three and six months ended June 30, 2025 and 2024, detailing the components used in the computation Earnings Per Share (Six months ended June 30) | Item | 2025 | 2024 | | :--- | :--- | :--- | | Net income available to common stockholders (in thousands) | $45,609 | $40,248 | | Weighted average common shares outstanding | 23,863,229 | 23,884,472 | | Basic earnings per common share | $1.91 | $1.69 | | Diluted weighted average common shares outstanding | 23,974,183 | 23,979,244 | | Diluted earnings per common share | $1.90 | $1.68 | [Note 3 - Investment Securities](index=14&type=section&id=Note%203%20--%20Investment%20Securities) This note details the composition, fair values, and unrealized gains/losses of the Company's available-for-sale (AFS) and held-to-maturity (HTM) investment securities, also addressing credit losses and the aging of unrealized losses Investment Securities (Available-for-sale, in thousands) | Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Amortized Cost | $1,255,703 | $1,257,436 | | Gross Unrealized Gains | $1,479 | $690 | | Gross Unrealized Losses | $(180,341) | $(194,834) | | Fair Value | $1,076,841 | $1,063,292 | - The Company's available-for-sale securities portfolio saw a decrease in gross unrealized losses from **$194.8 million** at December 31, 2024, to **$180.3 million** at June 30, 2025, primarily due to changes in interest rates and market conditions[35](index=35&type=chunk)[41](index=41&type=chunk) - As of June 30, 2025, there were **543 available-for-sale securities** with a fair value of **$960.1 million** in a continuous unrealized loss position for twelve months or more, but the Company does not consider these to be experiencing credit losses[39](index=39&type=chunk)[41](index=41&type=chunk) [Note 4 - Loans and Allowance for Credit Losses](index=17&type=section&id=Note%204%20%E2%80%93%20Loans%20and%20Allowance%20for%20Credit%20Losses) This note provides a detailed breakdown of the loan portfolio by type, geographic concentration, and credit quality, explaining the methodology for calculating the allowance for credit losses and presenting activity in the allowance Loan Portfolio Composition (in thousands) | Loan Type | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Loans secured by real estate | $3,958,442 | $3,906,596 | | Agricultural loans | $305,640 | $239,138 | | Commercial and industrial loans | $1,328,315 | $1,340,865 | | Consumer loans | $41,919 | $54,481 | | All other loans | $164,008 | $169,232 | | Total gross loans | $5,798,324 | $5,710,312 | | Allowance for credit losses | $(71,160) | $(70,182) | | Net loans | $5,688,480 | $5,595,666 | - Total loans to borrowers whose businesses are directly related to agriculture increased by **$57.2 million** to **$687.8 million** at June 30, 2025, from **$630.6 million** at December 31, 2024, primarily due to increased direct merchant financing[45](index=45&type=chunk) Allowance for Credit Losses Activity (Six months ended June 30, 2025, in thousands) | Item | Amount | | :--- | :--- | | Beginning balance | $70,182 | | Provision for credit loss expense | $4,219 | | Loans charged off | $(4,344) | | Recoveries collected | $1,103 | | Ending balance | $71,160 | - Nonaccrual loans decreased from **$28.78 million** at December 31, 2024, to **$20.35 million** at June 30, 2025, primarily due to loans becoming current or paid off and charge-offs[89](index=89&type=chunk)[175](index=175&type=chunk) [Note 5 - Goodwill and Intangible Assets](index=33&type=section&id=Note%205%20--%20Goodwill%20and%20Intangible%20Assets) This note provides a summary of the Company's goodwill and intangible assets, including their gross carrying value, accumulated amortization, and the impact of the Mid Rivers Insurance Group acquisition Goodwill and Intangible Assets (in thousands) | Item | June 30, 2025 Gross Carrying Value | June 30, 2025 Accumulated Amortization | December 31, 2024 Gross Carrying Value | December 31, 2024 Accumulated Amortization | | :--- | :--- | :--- | :--- | :--- | | Goodwill not subject to amortization | $207,151 | $3,760 | $207,151 | $3,760 | | Core deposit intangibles | $79,945 | $49,185 | $79,945 | $44,736 | | Other intangibles | $30,857 | $14,542 | $30,857 | $13,180 | | Total | $320,968 | $70,502 | $320,968 | $64,691 | - Goodwill of **$6.9 million** was recorded during the quarter ended September 30, 2024, due to the acquisition of Mid Rivers Insurance Group, Inc[96](index=96&type=chunk) Total Amortization Expense (in thousands) | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three months ended June 30 | $3,121 | $3,340 | | Six months ended June 30 | $6,352 | $6,837 | [Note 6 - Repurchase Agreements and Other Borrowings](index=34&type=section&id=Note%206%20--%20Repurchase%20Agreements%20and%20Other%20Borrowings) This note details the Company's repurchase agreements and other borrowings, including FHLB advances and subordinated debentures, outlining their balances, terms, and collateral Repurchase Agreements and FHLB Borrowings (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Securities sold under agreements to repurchase | $193,941 | $204,122 | | FHLB borrowings | $245,000 | $242,520 | - Securities sold under agreements to repurchase decreased by **$10.2 million** from December 31, 2024, to June 30, 2025, with all transactions having overnight maturities at a weighted average rate of **2.41%**[97](index=97&type=chunk) - The Company repurchased and cancelled **$3.0 million** of Blackhawk Subordinated Debt I Notes and **$7.0 million** of Blackhawk Subordinated Debt II Notes on February 5, 2025[193](index=193&type=chunk)[194](index=194&type=chunk) [Note 7 - Fair Value of Assets and Liabilities](index=36&type=section&id=Note%207%20--%20Fair%20Value%20of%20Assets%20and%20Liabilities) This note describes the Company's fair value measurements for assets and liabilities, categorizing them into a three-level hierarchy based on the observability of inputs, and provides detailed tables for recurring and nonrecurring measurements - Fair value measurements are categorized into **Level 1** (active exchange markets), **Level 2** (less active dealer/broker markets with observable inputs), and **Level 3** (unobservable inputs)[101](index=101&type=chunk)[102](index=102&type=chunk)[103](index=103&type=chunk) Fair Value Measurements of Assets (June 30, 2025, in thousands) | Asset Type | Fair Value | Level 1 | Level 2 | Level 3 | | :--- | :--- | :--- | :--- | :--- | | Total available-for-sale securities | $1,076,841 | $0 | $1,067,053 | $9,788 | | Equity securities | $4,543 | $4,543 | $0 | $0 | | Loans held for sale | $7,359 | $0 | $7,359 | $0 | | Derivative assets: interest rate swaps | $2,065 | $0 | $2,065 | $0 | | Total assets | $1,090,808 | $4,543 | $1,076,477 | $9,788 | - The fair value of assets measured using significant unobservable inputs (Level 3) increased from **$5.76 million** at December 31, 2024, to **$9.79 million** at June 30, 2025, primarily due to purchases of **$7.03 million** and maturities of **$3.00 million**[108](index=108&type=chunk) [Note 8 - Leases](index=40&type=section&id=Note%208%20--%20Leases) This note provides information on the Company's operating leases, including right-of-use assets, lease liabilities, weighted-average remaining lease term, and discount rate, also detailing the maturity of lease liabilities and components of lease expense Operating Lease Information (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Operating lease right-of-use assets | $13,152 | $13,861 | | Operating lease liabilities | $13,590 | $14,190 | | Weighted-average remaining lease term (years) | 4.6 | 4.7 | | Weighted-average discount rate | 3.48% | 3.22% | Total Lease Cost (Six months ended June 30, in thousands) | Item | 2025 | 2024 | | :--- | :--- | :--- | | Operating lease cost | $1,667 | $1,668 | | Short-term lease cost | $61 | $66 | | Variable lease cost | $598 | $356 | | Total lease cost | $2,326 | $2,090 | | Net lease cost | $2,155 | $1,883 | [Note 9 - Derivatives](index=42&type=section&id=Note%209%20%E2%80%93%20Derivatives) This note describes the Company's use of interest rate swaps as fair value hedges to mitigate interest rate risk on fixed-rate commercial real estate loans, providing details on notional balances, fair values, and income statement impact - The Company uses interest rate swaps designated as **fair value hedges** to manage interest rate risk on fixed-rate commercial real estate loans[122](index=122&type=chunk) Derivatives Designated as Hedging Instruments (in thousands) | Item | June 30, 2025 Notional Amount | June 30, 2025 Estimated Value | December 31, 2024 Notional Amount | December 31, 2024 Estimated Value | | :--- | :--- | :--- | :--- | :--- | | Interest rate swap agreements | $12,226 | $(1,488) | $12,486 | $(2,006) | [Note 10 - Regulatory Capital](index=43&type=section&id=Note%2010%20%E2%80%93%20Regulatory%20Capital) This note presents the Company's and First Mid Bank's regulatory capital ratios, demonstrating compliance with all capital adequacy requirements and well-capitalized standards under Basel III capital rules Regulatory Capital Ratios (June 30, 2025, in thousands) | Ratio | Company Actual Amount | Company Actual Ratio | Required Minimum Ratio | | :--- | :--- | :--- | :--- | | Total capital (to risk-weighted assets) | $968,670 | 15.76% | >10.50% | | Tier 1 capital (to risk-weighted assets) | $818,499 | 13.31% | >8.50% | | Common equity tier 1 capital (to risk-weighted assets) | $794,115 | 12.92% | >7.00% | | Tier 1 capital (to average assets) | $818,499 | 10.73% | >4.00% | - Both the Company and First Mid Bank met all capital adequacy requirements and qualified as **'well-capitalized'** as of June 30, 2025, with ratios exceeding regulatory minimums[126](index=126&type=chunk)[127](index=127&type=chunk) [Note 11 - Commitments](index=46&type=section&id=Note%2011%20%E2%80%93%20Commitments) This note details the Company's off-balance sheet commitments, including unused lines of credit, other commitments to extend credit, and standby letters of credit, highlighting the associated credit risk Off-Balance Sheet Commitments (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total unused commitments and lines of credit | $1,430,143 | $1,411,041 | | Standby letters of credit | $19,091 | $16,909 | - The total outstanding commitments increased to **$1.43 billion** at June 30, 2025, from **$1.41 billion** at December 31, 2024, representing potential future cash requirements[128](index=128&type=chunk)[144](index=144&type=chunk) [Note 12 - Subsequent Events](index=46&type=section&id=Note%2012%20%E2%80%93%20Subsequent%20Events) This note discloses a significant subsequent event: the Board of Directors approved a new stock repurchase program effective July 1, 2025, allowing for the repurchase of up to 1,200,000 shares - On June 24, 2025, the Board of Directors approved a new stock repurchase program, effective July 1, 2025, authorizing the repurchase of up to **1,200,000 shares** (approximately **5% of outstanding common stock**)[130](index=130&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=46&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on the Company's financial condition and results of operations for the three and six months ended June 30, 2025 and 2024, discussing key financial trends, performance metrics, and significant changes [Forward-Looking Statements](index=46&type=section&id=Forward-Looking%20Statements) This subsection includes a standard disclaimer regarding forward-looking statements, emphasizing that actual results may differ materially due to various risks and uncertainties inherent in the financial industry - The document contains forward-looking statements, which are subject to risks and uncertainties such as changes in interest rates, economic conditions, regulatory changes, and credit quality, that could cause actual results to differ materially[132](index=132&type=chunk) [Overview](index=48&type=section&id=Overview) This overview highlights key financial performance for the six months ended June 30, 2025, including net income, EPS, asset growth, net interest margin expansion, and changes in non-interest income and expense, while also noting strong capital and liquidity positions Key Performance Ratios (Annualized, Six months ended June 30) | Ratio | 2025 | 2024 | | :--- | :--- | :--- | | Return on average assets | 1.20% | 1.06% | | Return on average common equity | 10.52% | 10.14% | | Average equity to average assets | 11.44% | 10.44% | - Net interest margin, on a tax equivalent basis, increased to **3.66%** for the six months ended June 30, 2025, up from **3.30%** in the prior year, driven by higher earning asset yields and lower interest-bearing deposit/borrowing rates[136](index=136&type=chunk) - Total nonperforming loans decreased to **$21.9 million** at June 30, 2025, from **$29.8 million** at December 31, 2024, indicating an improvement in credit quality[139](index=139&type=chunk)[140](index=140&type=chunk) [Critical Accounting Policies and Use of Significant Estimates](index=50&type=section&id=Critical%20Accounting%20Policies%20and%20Use%20of%20Significant%20Estimates) This section refers readers to the Company's 2024 Annual Report on Form 10-K for a comprehensive description of its significant accounting policies and the use of estimates - The Company's critical accounting policies and significant estimates are detailed in the footnotes to the consolidated financial statements in its **2024 Annual Report on Form 10-K**[146](index=146&type=chunk) [Results of Consolidated Operations](index=50&type=section&id=Results%20of%20Consolidated%20Operations) This section analyzes the Company's consolidated operational results, focusing on net interest income, provision for credit losses, other income, other expenses, and income taxes, highlighting key drivers and changes for the periods presented [Net Interest Income](index=50&type=section&id=Net%20Interest%20Income) Net interest income, the Company's primary revenue source, increased significantly due to higher earning asset yields and lower interest-bearing liability rates, despite a slight decrease in average interest-bearing liabilities - Tax equivalent net interest income increased by **$11.3 million** (10.0%) to **$124.8 million** for the six months ended June 30, 2025, compared to **$113.4 million** in the prior year[153](index=153&type=chunk) - The net interest margin increased to **3.66%** for the first six months of 2025 from **3.30%** for the same period in 2024, primarily due to increased earning asset yields and decreased rates on interest-bearing deposits and borrowings[136](index=136&type=chunk)[157](index=157&type=chunk) Changes in Net Interest Income (Six months ended June 30, 2025 vs. 2024, in thousands) | Component | Volume Impact | Rate Impact | Total Change | | :--- | :--- | :--- | :--- | | Total interest income | $1,883 | $3,035 | $4,918 | | Total interest expense | $1,027 | $(7,458) | $(6,431) | | Net interest income | $856 | $10,493 | $11,349 | [Provision for Credit Losses](index=54&type=section&id=Provision%20for%20Credit%20Losses) The provision for credit losses increased for the six months ended June 30, 2025, reflecting higher net charge-offs and an increase in total loans past due Provision for Credit Losses (Six months ended June 30, in thousands) | Item | 2025 | 2024 | | :--- | :--- | :--- | | Provision for credit losses | $4,219 | $726 | | Net charge-offs | $3,241 | $1,089 | - Total loans past due 30 days or more increased to **0.57%** of loans at June 30, 2025, compared to **0.42%** at June 30, 2024[141](index=141&type=chunk) [Other Income](index=54&type=section&id=Other%20Income) Total non-interest income increased, primarily driven by higher insurance commissions due to an acquisition and a gain from bank-owned life insurance, partially offset by a decrease in other miscellaneous income Total Other Income (Six months ended June 30, in thousands) | Item | 2025 | 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Wealth management revenues | $11,205 | $10,727 | $478 | 4.5% | | Insurance commissions | $17,765 | $15,744 | $2,021 | 12.8% | | Bank owned life insurance | $2,893 | $2,313 | $580 | 25.1% | | Other | $816 | $2,009 | $(1,193) | -59.4% | | Total other income | $48,457 | $46,900 | $1,557 | 3.3% | - Insurance commissions increased primarily due to the acquisition of **Mid Rivers Insurance Group** during the third quarter of 2024[158](index=158&type=chunk) - Bank owned life insurance income increased by **$580,000** due to a gain recognized on a death claim filed in 2025[158](index=158&type=chunk) [Other Expense](index=55&type=section&id=Other%20Expense) Total non-interest expense increased, mainly due to higher salaries and employee benefits, and nonrecurring technology project expenses, partially offset by reduced integration expenses from a prior acquisition Total Other Expense (Six months ended June 30, in thousands) | Item | 2025 | 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Salaries and employee benefits | $65,371 | $60,612 | $4,759 | 7.9% | | Net occupancy and equipment expense | $16,348 | $15,067 | $1,281 | 8.5% | | Legal and professional | $5,833 | $4,985 | $848 | 17.0% | | Other operating expenses | $8,030 | $10,508 | $(2,478) | -23.6% | | Total other expense | $109,234 | $104,753 | $4,481 | 4.3% | - The increase in salaries and employee benefits was primarily due to annual raises, higher incentive compensation accruals, and the acquisition of **Mid Rivers Insurance Group**[162](index=162&type=chunk) - Nonrecurring technology project expenses contributed to increases in occupancy and equipment and legal and professional fees[162](index=162&type=chunk) [Income Taxes](index=55&type=section&id=Income%20Taxes) Income tax expense decreased for the six months ended June 30, 2025, primarily due to a lower effective tax rate resulting from decreased interest expense disallowance and a state law change Income Tax Expense (Six months ended June 30, in thousands) | Item | 2025 | 2024 | | :--- | :--- | :--- | | Income taxes | $12,667 | $13,408 | | Effective tax rate | 21.7% | 25.0% | - The decrease in the effective tax rate was mainly due to a reduction in interest expense disallowance and a one-time revaluation of deferred taxes following an **Illinois state law change**[160](index=160&type=chunk) [Analysis of Consolidated Balance Sheets](index=56&type=section&id=Analysis%20of%20Consolidated%20Balance%20Sheets) This section provides a detailed analysis of the Company's balance sheet components, including securities, loans, nonperforming assets, deposits, borrowings, interest rate sensitivity, capital resources, stock plans, liquidity, and off-balance sheet arrangements [Securities](index=56&type=section&id=Securities) The Company's investment portfolio slightly decreased, with a focus on managing credit risk, liquidity, and capital, primarily composed of U.S. Treasury, state/political subdivision obligations, and mortgage-backed securities, with strong credit ratings Total Securities (Amortized Cost, in thousands) | Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | U.S. Treasury securities and obligations of U.S. government corporations and agencies | $199,299 | $212,513 | | Obligations of states and political subdivisions | $325,609 | $324,046 | | Mortgage-backed securities: GSE residential | $685,640 | $653,760 | | Other securities | $47,442 | $69,396 | | Total securities | $1,257,990 | $1,259,715 | - The investment portfolio decreased by **$1.7 million** from December 31, 2024, to June 30, 2025, due to sales, paydowns, calls, and maturities, partially offset by new purchases[163](index=163&type=chunk) - The majority of the investment securities are highly rated, with significant portions in **AAA** and **AA +/- categories**[163](index=163&type=chunk) [Loans](index=57&type=section&id=Loans) The loan portfolio, the Company's largest earning asset, increased by $94.5 million, driven by growth in construction and land development and multifamily residential properties, as well as seasonal agricultural demand, with concentrations in agriculture and real estate Loan Portfolio Composition (Amortized Cost, in thousands) | Loan Type | June 30, 2025 | % Outstanding Loans | December 31, 2024 | % Outstanding Loans | | :--- | :--- | :--- | :--- | :--- | | Loans secured by real estate | $3,930,360 | 68.2% | $3,873,679 | 68.4% | | Agricultural loans | $306,374 | 5.3% | $239,671 | 4.2% | | Commercial and industrial loans | $1,324,653 | 23.0% | $1,335,920 | 23.6% | | Total loans | $5,766,999 | 100.0% | $5,672,462 | 100.0% | - Loan balances increased by **$94.5 million** (1.7%), primarily in construction and land development and multifamily residential properties, and seasonal agricultural operating loans[165](index=165&type=chunk) Industry Loan Concentrations (June 30, 2025, in thousands) | Industry | Principal Balance | % Outstanding Loans | | :--- | :--- | :--- | | Other grain farming | $584,470 | 10.13% | | Lessors of non-residential buildings | $1,046,682 | 18.15% | | Lessors of residential buildings and dwellings | $616,200 | 10.68% | | Hotels and motels | $221,541 | 3.84% | [Nonperforming Loans and Nonperforming Other Assets](index=58&type=section&id=Nonperforming%20Loans%20and%20Nonperforming%20Other%20Assets) Nonperforming loans and repossessed assets decreased significantly, reflecting improved credit quality, with the Company's policy to discontinue interest accrual on loans 90 days past due or when collection is doubtful Nonperforming Loans and Repossessed Assets (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Nonaccrual loans | $20,354 | $28,775 | | Modified loans (performing) | $1,541 | $1,060 | | Total nonperforming loans | $21,895 | $29,835 | | Repossessed assets | $1,677 | $2,195 | | Total nonperforming loans and repossessed assets | $23,572 | $32,030 | - Nonaccrual loans decreased by **$8.4 million** during the first six months of 2025, primarily due to loans becoming current or paid-off and charge-offs[175](index=175&type=chunk) - Repossessed assets decreased by **$1.0 million** during the first six months of 2025, mainly due to sales of repossessed assets[176](index=176&type=chunk) [Loan Quality and Allowance for Credit Losses](index=59&type=section&id=Loan%20Quality%20and%20Allowance%20for%20Credit%20Losses) Management's estimate for the allowance for credit losses considers historical net loan losses, nonaccrual/past due loans, economic conditions, and specific risk factors like agriculture and hotels, with the allowance to nonperforming loans ratio remaining consistent - The allowance for credit losses is management's best estimate for probable losses, considering factors like historical net loan losses, nonaccrual loans, economic conditions, and industry-specific risks[177](index=177&type=chunk)[178](index=178&type=chunk) - The Company's loan portfolio has concentrations in agriculture (**$687.8 million**) and motels/hotels (**$221.5 million**), which are subject to specific economic and market risks[179](index=179&type=chunk) Loan Quality Ratios (Six months ended June 30) | Ratio | 2025 | 2024 | | :--- | :--- | :--- | | Ratio of annualized net charge-offs to average loans | 0.11% | 0.04% | | Ratio of allowance for credit losses to loans outstanding | 1.23% | 1.23% | | Ratio of allowance for credit losses to nonperforming loans | 325% | 358% | [Deposits](index=61&type=section&id=Deposits) Deposits, primarily from consumer, commercial, and public funds, are the main funding source, with average deposit balances increasing and a shift from non-interest-bearing and savings to interest-bearing and time deposits Average Deposits and Weighted Average Rates (Six months ended June 30, in thousands) | Deposit Type | 2025 Average Balance | 2025 Weighted Average Rate | 2024 Average Balance | 2024 Weighted Average Rate | | :--- | :--- | :--- | :--- | :--- | | Non-interest-bearing demand deposits | $1,386,330 | —% | $1,403,606 | —% | | Interest-bearing demand deposits | $3,079,773 | 2.00% | $3,029,068 | 2.25% | | Savings | $639,424 | 0.10% | $697,953 | 0.10% | | Time deposits | $1,050,342 | 3.43% | $1,002,655 | 3.64% | | Total average deposits | $6,155,869 | 1.59% | $6,133,282 | 1.72% | - Average deposit balances increased by **$12.7 million** during the first six months of 2025, with non-interest-bearing deposits decreasing and interest-bearing and time deposits increasing[186](index=186&type=chunk) - Approximately **99%** of the Company's deposit accounts are less than **$250,000**, with an average account balance of **$23,000**[186](index=186&type=chunk) [Repurchase Agreements and Other Borrowings](index=63&type=section&id=Repurchase%20Agreements%20and%20Other%20Borrowings) This section details the Company's funding sources from repurchase agreements and other borrowings, including FHLB advances and various subordinated debentures, also discussing the impact of the Volcker Rule on trust preferred securities Repurchase Agreements and Other Borrowings (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Securities sold under agreements to repurchase | $193,941 | $204,122 | | Federal Home Loan Bank advances | $245,000 | $242,520 | | Subordinated debt | $79,590 | $87,472 | | Junior subordinated debentures | $24,384 | $24,280 | | Total | $542,915 | $558,394 | - The Company repurchased and cancelled **$4.0 million**, **$15.0 million**, and **$1.0 million** of its 3.95% Fixed-to-Floating Rate Subordinated Notes due 2030 during 2024, leaving **$76 million** outstanding as of June 30, 2025[191](index=191&type=chunk) - The **Volcker Rule** is not anticipated to have a material effect on the Company's operations, as its existing trust preferred securities are grandfathered due to its asset size[202](index=202&type=chunk) [Interest Rate Sensitivity](index=67&type=section&id=Interest%20Rate%20Sensitivity) The Company actively manages its interest rate risk through its asset liability management committee (ALCO), utilizing static GAP analysis and other financial models to project net interest income under various rate scenarios, and was asset sensitive as of June 30, 2025 - The Company aims to maximize net interest margin while maintaining an acceptable level of interest rate risk, which is overseen by its **ALCO**[203](index=203&type=chunk) - As of June 30, 2025, the Company was **asset sensitive** on a cumulative basis through the twelve-month time horizon, indicating that future decreases in interest rates could adversely affect net interest income[204](index=204&type=chunk) [Capital Resources](index=69&type=section&id=Capital%20Resources) The Company's stockholders' equity increased, and it continues to maintain strong regulatory capital ratios, exceeding all 'well-capitalized' standards - Stockholders' equity increased by **$47.7 million** (5.6%) to **$894.1 million** at June 30, 2025, from **$846.4 million** at December 31, 2024, driven by net income and other comprehensive income[205](index=205&type=chunk) - The Company and First Mid Bank consistently maintained regulatory capital ratios above the **'well-capitalized' standards** as of June 30, 2025, and December 31, 2024[206](index=206&type=chunk) [Stock Plans](index=69&type=section&id=Stock%20Plans) The Company operates a Stock Incentive Plan (SI Plan) and an Employee Stock Purchase Plan (ESPP) to align employee and director interests with stockholders, and a new stock repurchase program was approved, replacing the previous one - Under the **2017 Stock Incentive Plan**, **79,635 restricted stock awards** and **53,130 stock unit awards** were granted during the first six months of 2025[208](index=208&type=chunk) - The **Employee Stock Purchase Plan (ESPP)** allows eligible employees to purchase common stock at a **15% discount**; **13,970 shares** were issued under the ESPP during the first six months of 2025[209](index=209&type=chunk) - A new stock repurchase program, effective July 1, 2025, authorizes the repurchase of up to **1,200,000 shares**, replacing the previously authorized plan[130](index=130&type=chunk)[211](index=211&type=chunk) [Liquidity](index=69&type=section&id=Liquidity) The Company maintains sufficient liquidity through various sources, including federal fund lines, FHLB advances, Federal Reserve Bank borrowing, and a revolving credit agreement, to meet its financial obligations and fund operations - The Company's liquidity sources include **$130 million** in overnight federal fund lines, approximately **$1.6 billion** in additional FHLB advances supported by excess collateral, and access to the Federal Reserve Bank's Discount Window with **$401 million** in contingent liquidity[214](index=214&type=chunk) - Net cash provided by operating activities was **$55.6 million**, cash used in investing activities was **$93.1 million**, and cash provided by financing activities was **$106.3 million** for the six months ended June 30, 2025[213](index=213&type=chunk) Significant Contractual Obligations (June 30, 2025, in thousands) | Obligation Type | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | | :--- | :--- | :--- | :--- | :--- | :--- | | Time deposits | $1,081,944 | $944,092 | $117,679 | $19,520 | $653 | | Debt | $103,974 | $4,124 | $0 | $0 | $99,850 | | Other borrowing | $438,941 | $268,941 | $75,000 | $70,000 | $25,000 | | Operating leases | $15,234 | $3,139 | $5,575 | $3,541 | $2,979 | | Supplemental retirement | $1,980 | $50 | $250 | $300 | $1,380 | [Off-Balance Sheet Arrangements](index=72&type=section&id=Off-Balance%20Sheet%20Arrangements) The Company engages in off-balance sheet arrangements, such as lines of credit and letters of credit, to meet customer financing needs, applying the same credit policies as for on-balance sheet loans - Off-balance sheet arrangements include lines of credit, letters of credit, and other commitments to extend credit, which involve credit, interest rate, and liquidity risks[215](index=215&type=chunk) - The Company uses consistent credit policies and collateral requirements for off-balance sheet instruments as it does for loans, and does not anticipate losses from these instruments[215](index=215&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=72&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section states that there have been no material changes in the Company's market risk profile since December 31, 2024, and refers to the Annual Report on Form 10-K for detailed information - There has been no material change in the market risk faced by the Company since **December 31, 2024**[216](index=216&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=72&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - The Company's disclosure controls and procedures were evaluated and deemed **effective** as of **June 30, 2025**[217](index=217&type=chunk) - No material changes occurred in the Company's internal control over financial reporting during the last fiscal quarter[217](index=217&type=chunk) [PART II - OTHER INFORMATION](index=72&type=section&id=PART%20II) [ITEM 1. LEGAL PROCEEDINGS](index=72&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The Company is involved in routine litigation common to its industry, but management believes none of the existing claims will have a material adverse effect on its financial position - The Company is subject to claims and lawsuits arising in the ordinary course of business, but management does not expect them to have a **material adverse effect** on its financial position, results of operations, or cash flows[20](index=20&type=chunk)[219](index=219&type=chunk) [ITEM 1A. RISK FACTORS](index=72&type=section&id=ITEM%201A.%20RISK%20FACTORS) The Company is exposed to various risks, including interest rate, liquidity, credit, operational, and economic risks, with no material changes to the risk factors previously disclosed in the 2024 Annual Report on Form 10-K - The Company is exposed to various risks common to financial institutions, such as **interest rate, liquidity, credit, operational, and economic risks**[220](index=220&type=chunk) - There have been no material changes to the risk factors described in the Company's **Annual Report on Form 10-K** for the year ended December 31, 2024[220](index=220&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=72&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) The Company did not repurchase any equity securities during the second quarter of 2025, and approximately $2.9 million remained available under its existing stock repurchase program Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | | :--- | :--- | :--- | :--- | :--- | | April 1, 2025-April 30, 2025 | — | $— | — | $2,941,000 | | May 1, 2025-May 31, 2025 | — | $— | — | $2,941,000 | | June 1, 2025-June 30, 2025 | — | $— | — | $2,941,000 | | Total | — | $— | — | $2,941,000 | - The Company did not repurchase any shares during the second quarter of 2025, with **$2.9 million** remaining capacity under its stock repurchase program[210](index=210&type=chunk)[221](index=221&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=74&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) This section states that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[222](index=222&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=74&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This section indicates that mine safety disclosures are not applicable to the Company - Mine safety disclosures are not applicable to the Company[223](index=223&type=chunk) [ITEM 5. OTHER INFORMATION](index=74&type=section&id=ITEM%205.%20OTHER%20INFORMATION) This section confirms that no directors or officers adopted, modified, or terminated Rule 10b5-1 trading arrangements during the quarter ended June 30, 2025 - No directors or officers adopted, modified, or terminated a **Rule 10b5-1 trading arrangement** or a non-Rule 10b5-1 trading arrangement during the quarter ended June 30, 2025[224](index=224&type=chunk) [ITEM 6. EXHIBITS](index=75&type=section&id=ITEM%206.%20EXHIBITS) This section lists all exhibits required by Item 601 of Regulation S-K and filed with the Quarterly Report on Form 10-Q - The report includes an Exhibit Index listing all required exhibits, such as amendments to the Certificate of Incorporation, credit agreements, stock incentive plans, employment agreements, and certifications[226](index=226&type=chunk)[227](index=227&type=chunk) [SIGNATURES](index=76&type=section&id=SIGNATURES) This section contains the official signatures of the Company's Chief Executive Officer and Chief Financial and Risk Officer, certifying the accuracy of the report - The report is duly signed on behalf of First Mid Bancshares, Inc. by **Joseph R. Dively**, Chief Executive Officer, and **Jordan D. Read**, Chief Financial and Risk Officer, on **August 8, 2025**[229](index=229&type=chunk)

Group 1: Earnings Performance - First Mid Bancshares reported quarterly earnings of $0.99 per share, exceeding the Zacks Consensus Estimate of $0.91 per share, and up from $0.84 per share a year ago, representing an earnings surprise of +8.79% [1] - The company posted revenues of $87.46 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 3.32%, compared to $79.19 million in the same quarter last year [2] - Over the last four quarters, First Mid Bancshares has surpassed consensus EPS estimates three times and topped consensus revenue estimates three times as well [2] Group 2: Stock Performance and Outlook - First Mid Bancshares shares have increased by approximately 5.6% since the beginning of the year, while the S&P 500 has gained 8.1% [3] - The company's current consensus EPS estimate for the upcoming quarter is $0.89 on revenues of $85.65 million, and for the current fiscal year, it is $3.73 on revenues of $341.75 million [7] - The estimate revisions trend for First Mid Bancshares was mixed ahead of the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Group 3: Industry Context - The Zacks Industry Rank for Banks - Northeast, to which First Mid Bancshares belongs, is currently in the top 23% of over 250 Zacks industries, suggesting a favorable industry outlook [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

[Financial Performance Overview](index=1&type=section&id=Financial%20Performance%20Overview) First Mid Bancshares achieved record quarterly net income and diluted EPS, driven by growth in net interest income, loans, and deposits, alongside an expanded net interest margin [Second Quarter 2025 Highlights](index=1&type=section&id=Second%20Quarter%202025%20Highlights) First Mid Bancshares reported record quarterly net income of $23.4 million and $0.98 diluted EPS, with growth in net interest income, loans, and deposits, and an expanded net interest margin Q2 2025 Key Performance Indicators | Metric | Value | Change | | :--- | :--- | :--- | | **Net Income** | $23.4 million | Record high | | **Diluted EPS** | $0.98 | +$0.05 (Quarterly) | | **Adjusted Net Income** | $23.7 million | - | | **Adjusted Diluted EPS** | $0.99 | - | | **Net Interest Margin (TE)** | 3.72% | +12 bps (Quarterly) | | **Total Loans** | $5.77 billion | +1.20% (Quarterly) | | **Total Deposits** | $6.19 billion | +0.98% (Quarterly) | | **Tangible Book Value/Share** | - | +4.3% (Quarterly) | | **Quarterly Dividend** | $0.25 per share | +$0.01 | [Management Commentary](index=1&type=section&id=Management%20Commentary) The Chairman and CEO highlighted strong first-half results, attributing record quarterly net income to expanded net interest income and a strategic focus on higher return on assets - The company achieved **record quarterly net income** driven by strategic initiatives to increase return on assets and expand net interest income[3](index=3&type=chunk) - Management emphasized continued focus on maintaining a disciplined credit culture and making investments in technology platforms to support future growth, despite a fluctuating macroeconomic environment[3](index=3&type=chunk) [Detailed Financial Analysis](index=1&type=section&id=Detailed%20Financial%20Analysis) This section provides an in-depth analysis of net interest income, loan portfolio, asset quality, deposits, noninterest income, and noninterest expenses [Net Interest Income and Margin](index=1&type=section&id=Net%20Interest%20Income%20and%20Margin) Net interest income increased to $63.9 million, driven by higher yields on earning assets and stable funding costs, expanding the tax-equivalent net interest margin to 3.72% Net Interest Income Performance | Period | Net Interest Income | Change | | :--- | :--- | :--- | | **Q2 2025 vs Q1 2025** | $63.9 million | +$4.5 million (+7.5%) | | **Q2 2025 vs Q2 2024** | $63.9 million | +$7.1 million (+12.5%) | - The tax-equivalent net interest margin increased to **3.72%**, up 12 basis points from the prior quarter, driven by higher earning asset yields and stable funding costs, with a 9 basis point increase excluding accretion income[6](index=6&type=chunk) [Loan Portfolio and Asset Quality](index=1&type=section&id=Loan%20Portfolio%20and%20Asset%20Quality) Total loans grew to $5.77 billion with diversified growth, while asset quality remained solid with an ACL to total loans ratio of 1.23% and a decline in non-performing loans - Total loans increased by **$68.1 million (1.2%)** from the prior quarter, reaching **$5.77 billion**, and grew by **$206.4 million (3.7%)** year-over-year[7](index=7&type=chunk)[8](index=8&type=chunk) Key Asset Quality Metrics (Q2 2025) | Metric | Value | | :--- | :--- | | **Allowance for Credit Losses (ACL)** | $71.2 million | | **ACL to Total Loans Ratio** | 1.23% | | **Non-performing Loans to Total Loans** | 0.38% | | **ACL to Non-performing Loans** | 325% | | **Nonperforming Assets to Total Assets** | 0.31% | - Nonperforming loans decreased by **$4.7 million** to **$21.9 million** in Q2 2025, though special mention loans increased by $7.8 million and substandard loans increased by $5.1 million[10](index=10&type=chunk) [Deposits](index=2&type=section&id=Deposits) Total deposits increased by $59.8 million, or 0.98%, to $6.19 billion, primarily driven by growth in interest-bearing demand, money market, and time deposits - Total deposits ended Q2 2025 at **$6.19 billion**, a quarterly increase of **$59.8 million (0.98%)**[11](index=11&type=chunk) [Noninterest Income](index=2&type=section&id=Noninterest%20Income) Noninterest income was $23.6 million, a quarterly decrease due to seasonality but a 5.2% year-over-year increase driven by higher insurance commissions and a debit card fee incentive Noninterest Income Comparison | Period | Noninterest Income | Change | | :--- | :--- | :--- | | **Q2 2025 vs Q1 2025** | $23.6 million | -$1.3 million | | **Q2 2025 vs Q2 2024** | $23.6 million | +$1.2 million (+5.2%) | - Key components of noninterest income in Q2 2025 included **$5.4 million** from wealth management, **$7.8 million** from insurance revenues, and a **$1.0 million** annual incentive from a service provider for debit card fees[12](index=12&type=chunk) [Noninterest Expenses](index=2&type=section&id=Noninterest%20Expenses) Noninterest expenses totaled $54.8 million, primarily due to annual salary increases and higher incentive compensation, while the adjusted efficiency ratio improved to 58.09% - Noninterest expense increased to **$54.8 million**, primarily driven by higher salaries and employee benefits from annual increases and incentive compensation[14](index=14&type=chunk)[15](index=15&type=chunk) - The adjusted efficiency ratio improved to **58.09%** in Q2 2025, compared to 58.88% in Q1 2025 and 59.61% in Q2 2024[15](index=15&type=chunk) [Capital Management and Shareholder Returns](index=2&type=section&id=Capital%20Management%20and%20Shareholder%20Returns) The company maintained strong capital levels well above regulatory requirements and demonstrated commitment to shareholder returns through increased dividends and tangible book value growth [Capital Levels](index=2&type=section&id=Capital%20Levels) The company maintained strong capital levels, with the Total capital to risk-weighted assets ratio at 15.76%, significantly exceeding regulatory "well capitalized" requirements Capital Ratios (Q2 2025) | Ratio | Value | | :--- | :--- | | **Total capital to risk-weighted assets** | 15.76% | | **Tier 1 capital to risk-weighted assets** | 13.31% | | **Common equity tier 1 capital to risk-weighted assets** | 12.92% | | **Leverage ratio** | 10.73% | [Shareholder Returns](index=2&type=section&id=Shareholder%20Returns) The company increased its quarterly dividend to $0.25 per share and saw a 4.3% increase in tangible book value per share, primarily driven by earnings growth - The Board of Directors increased the quarterly dividend to **$0.25 per share**[17](index=17&type=chunk) - Tangible book value per share increased by **4.3% ($1.09)** during Q2 2025, with **$0.90** of the increase attributed to earnings growth[16](index=16&type=chunk) [Consolidated Financial Statements](index=4&type=section&id=Consolidated%20Financial%20Statements) This section provides the unaudited condensed consolidated balance sheets and statements of income, offering a comprehensive view of the company's financial position and performance [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents the unaudited condensed consolidated balance sheets as of June 30, 2025, December 31, 2024, and June 30, 2024, detailing assets, liabilities, and stockholders' equity Key Balance Sheet Items (as of June 30, 2025) | Item | Amount (in thousands) | | :--- | :--- | | **Total Assets** | $7,680,475 | | **Net Loans** | $5,695,839 | | **Total Deposits** | $6,190,199 | | **Total Liabilities** | $6,786,335 | | **Total Stockholders' Equity** | $894,140 | [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) This section presents the unaudited condensed consolidated statements of income for the three and six months ended June 30, 2025 and 2024, and a trailing five-quarter view, detailing revenues, expenses, and net income Income Statement Highlights (Three Months Ended June 30, 2025) | Item | Amount (in thousands) | | :--- | :--- | | **Net Interest Income** | $63,863 | | **Provision for Credit Losses** | $2,567 | | **Total Non-interest Income** | $23,593 | | **Total Non-interest Expense** | $54,762 | | **Net Income** | $23,438 | | **Diluted EPS** | $0.98 | [Key Financial Ratios and Non-GAAP Reconciliations](index=7&type=section&id=Key%20Financial%20Ratios%20and%20Non-GAAP%20Reconciliations) This section provides a detailed breakdown of financial ratios, loan and deposit portfolios, asset quality metrics, and reconciliations of non-GAAP financial measures [Consolidated Financial Highlights and Ratios](index=7&type=section&id=Consolidated%20Financial%20Highlights%20and%20Ratios) This section offers a comprehensive view of the company's financial health and performance trends over the last five quarters, detailing loan and deposit portfolios, asset quality, and key performance ratios Key Performance Ratios (Q2 2025) | Ratio | Value | | :--- | :--- | | **Net Interest Margin (tax equivalent)** | 3.72% | | **Return on Average Assets** | 1.20% | | **Adjusted Return on Average Assets** | 1.23% | | **Return on Average Common Equity** | 10.52% | | **Adjusted Return on Average Common Equity** | 10.80% | | **Efficiency Ratio (tax equivalent)** | 58.09% | - Tangible book value per common share increased to **$26.62** at the end of Q2 2025, up from $25.53 in the prior quarter and $23.28 in the prior year[32](index=32&type=chunk) [Net Interest Margin Analysis](index=8&type=section&id=Net%20Interest%20Margin%20Analysis) This section details the components of the net interest margin calculation for Q2 2025, breaking down average balances, interest income/expense, and average rates for assets and liabilities, resulting in a 3.72% tax-equivalent net interest margin Net Interest Margin Breakdown (Q2 2025) | Component | Average Balance (in thousands) | Average Rate | | :--- | :--- | :--- | | **Total Interest Earning Assets** | $6,975,783 | 5.41% | | **Total Interest Bearing Liabilities** | $5,357,937 | 2.21% | | **Net Interest Spread** | - | 3.20% | | **Tax Equivalent Net Interest Margin** | - | 3.72% | - The company changed its methodology for calculating net interest margin in Q1 2025 to be more consistent with peer banks, now defined as annualized tax-equivalent net interest income divided by average interest-earning assets[33](index=33&type=chunk) [Reconciliation of Non-GAAP Financial Measures](index=10&type=section&id=Reconciliation%20of%20Non-GAAP%20Financial%20Measures) This section provides reconciliations of non-GAAP financial measures to their GAAP counterparts, detailing adjustments for nonrecurring technology project and acquisition costs to derive adjusted earnings and EPS Reconciliation of Net Income to Adjusted Earnings (Q2 2025) | Item | Amount (in thousands) | | :--- | :--- | | **Net Income - GAAP** | $23,438 | | **Adjustments (post-tax):** | | | Nonrecurring technology project expenses | $246 | | Integration and acquisition expenses | $3 | | **Adjusted Earnings - non-GAAP** | $23,687 | - For Q2 2025, adjusted diluted EPS was **$0.99**, compared to the GAAP diluted EPS of **$0.98**[27](index=27&type=chunk)[40](index=40&type=chunk)

Core Viewpoint - First Mid Bancshares, Inc. reported strong financial results for the second quarter of 2025, achieving record high quarterly net income and growth in net interest income, loans, and deposits, while maintaining a disciplined credit culture and investing in technology for future growth [3][10]. Financial Performance - Net interest income for Q2 2025 was $63.9 million, up $4.5 million or 7.5% from Q1 2025, driven by higher yields on earning assets [4][10]. - Compared to Q2 2024, net interest income increased by $7.1 million or 12.5%, with interest income rising by $4.7 million [5]. - The net interest margin was 3.72% for Q2 2025, an increase of 12 basis points from the previous quarter [6][10]. Loan Portfolio - Total loans reached $5.77 billion, an increase of $68.1 million or 1.2% from the prior quarter, with significant growth in construction, land development, and commercial loans [7][10]. - Year-over-year, loan balances increased by $206.4 million or 3.7%, with notable increases in construction and agricultural operating lines [8]. Asset Quality - The allowance for credit losses (ACL) was $71.2 million, with an ACL to total loans ratio of 1.23% and a non-performing loans ratio of 0.38% [9][10]. - Non-performing loans decreased by $4.7 million to $21.9 million, while special mention loans and substandard loans increased [11]. Deposits - Total deposits were $6.19 billion, up $59.8 million or 0.98% from the previous quarter, primarily driven by interest-bearing demand deposits and money market accounts [12][10]. Noninterest Income and Expenses - Noninterest income for Q2 2025 was $23.6 million, a decline from Q1 2025 due to seasonality in wealth management and insurance [13][10]. - Noninterest expenses totaled $54.8 million, slightly up from the previous quarter, primarily due to increased salaries and employee benefits [15][16]. Capital Levels and Dividend - The company's capital levels remained strong, with total capital to risk-weighted assets at 15.76% and a tangible book value per share increase of 4.3% during the quarter [17][10]. - The Board of Directors declared a quarterly dividend increase to $0.25 per share, payable on August 29, 2025 [18][10].

Core Insights - First Mid Bank & Trust, with nearly $8 billion in assets, is modernizing its technology infrastructure through a partnership with Jack Henry to enhance operational efficiency and support growth [1][2][4] - The bank has expanded from a rural institution to a full-service financial entity with over 80 branches across multiple states, focusing on both retail and commercial customers [2][6] - Jack Henry's technology will provide a scalable and flexible foundation, reducing manual tasks and streamlining workflows, while offering access to over 950 API-integrated third-party fintechs [3][4] Company Overview - First Mid Bank & Trust has a diversified portfolio that includes a full-service insurance agency and a wealth management division, reflecting its aggressive growth strategy over the past decade [2][6] - Jack Henry is an S&P 500 financial technology company that has been providing technology solutions for nearly 50 years, focusing on innovation and collaboration with financial institutions [5] Strategic Importance - The modernization of First Mid's technology stack is crucial for maintaining competitiveness in a rapidly changing environment, allowing the bank to innovate and better serve its customers [4][6] - Jack Henry's commitment to providing a future-ready platform aligns with First Mid's growth strategy, enabling the bank to continue expanding organically and through acquisitions [4][5]