First Mid(FMBH) - 2024 Q2 - Quarterly Report

Part I Item 1. Financial Statements The financial statements for the period ending June 30, 2024, show stable total assets at $7.6 billion and increased net income to $40.2 million, primarily due to the Blackhawk acquisition Condensed Consolidated Balance Sheets As of June 30, 2024, total assets were $7.581 billion, with a slight decrease in net loans and deposits, while stockholders' equity increased to $813.6 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2024 (in thousands) | December 31, 2023 (in thousands) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $235,480 | $143,064 | | Investment securities (AFS & HTM) | $1,112,927 | $1,173,858 | | Net loans | $5,484,541 | $5,506,910 | | Goodwill, net | $196,461 | $196,461 | | Total assets | $7,581,060 | $7,586,794 | | Liabilities & Equity | | | | Total deposits | $6,115,779 | $6,123,659 | | FHLB borrowings | $263,735 | $263,787 | | Total liabilities | $6,767,415 | $6,793,590 | | Total stockholders' equity | $813,645 | $793,204 | | Total liabilities and stockholders' equity | $7,581,060 | $7,586,794 | Condensed Consolidated Statements of Income Net income for the six months ended June 30, 2024, rose to $40.2 million, driven by increased net interest income, despite a provision for credit losses and a slight decrease in diluted EPS Key Income Statement Data (in thousands, except per share data) | Metric | Three Months Ended June 30, 2024 (in thousands) | Three Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2023 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $56,765 | $42,367 | $112,235 | $85,558 | | Provision for credit losses | $1,083 | $458 | $726 | ($359) | | Total Other Income | $22,422 | $19,486 | $46,900 | $41,965 | | Total Other Expense | $51,391 | $40,042 | $104,753 | $81,619 | | Net Income | $19,745 | $16,567 | $40,248 | $35,747 | | Diluted EPS | $0.82 | $0.80 | $1.68 | $1.74 | Condensed Consolidated Statements of Comprehensive Income Comprehensive income for the six months ended June 30, 2024, decreased to $29.7 million, primarily due to a $10.6 million other comprehensive loss from unrealized losses on available-for-sale securities Comprehensive Income (in thousands) | Description | Six months ended June 30, 2024 (in thousands) | Six months ended June 30, 2023 (in thousands) | | :--- | :--- | :--- | | Net income | $40,248 | $35,747 | | Other comprehensive income (loss), net of taxes | ($10,571) | ($59) | | Comprehensive income | $29,677 | $35,688 | Condensed Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity increased to $813.6 million by June 30, 2024, driven by net income, partially offset by cash dividends and unrealized securities losses - Key drivers for the change in stockholders' equity during the first six months of 2024 were net income of $40.2 million, offset by cash dividends of $10.9 million and an other comprehensive loss of $10.6 million[9] Condensed Consolidated Statements of Cash Flows Cash and cash equivalents increased by $92.4 million for the six months ended June 30, 2024, driven by operating and investing activities, partially offset by financing activities Summary of Cash Flows (in thousands) | Activity | Six months ended June 30, 2024 (in thousands) | Six months ended June 30, 2023 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $53,020 | $38,158 | | Net cash provided by investing activities | $69,264 | $57,173 | | Net cash used in financing activities | ($29,868) | ($73,511) | | Increase in cash and cash equivalents | $92,416 | $21,820 | Notes to Condensed Consolidated Financial Statements The notes detail accounting policies and financial statement items, including the 2023 Blackhawk Bancorp acquisition, investment securities, loan portfolio, and fair value measurements - On August 15, 2023, the Company completed its acquisition of Blackhawk Bancorp, Inc. for 3,290,222 shares of First Mid common stock valued at $93.51 million and $1,928 of cash[20][124] - The company adopted ASU No. 2023-09, which will expand income tax disclosures in future filings but has no immediate impact on the financial statements[33] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance for the six months ended June 30, 2024, highlighting increased net income and an improved net interest margin, driven by the Blackhawk acquisition and higher asset yields Overview For the first half of 2024, net income was $40.2 million, total assets remained stable at $7.6 billion, and the tax-equivalent net interest margin improved to 3.30%, largely due to the Blackhawk acquisition Performance Ratios (Annualized) | Ratio | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :--- | :--- | :--- | | Return on average assets | 1.06% | 1.07% | | Return on average common equity | 10.14% | 11.07% | - Net interest margin, on a tax equivalent basis, increased to 3.30% for the six months ended June 30, 2024, up from 2.89% for the same period in 2023, primarily due to higher earning asset yields[147] - Nonperforming loans were $19.1 million at June 30, 2024, compared to $20.1 million at December 31, 2023[148] Results of Consolidated Operations Operational results for the first half of 2024 show a 30.3% increase in tax-equivalent net interest income to $113.4 million, alongside growth in other income and expenses, largely influenced by the Blackhawk acquisition - Tax equivalent net interest income increased by $26.4 million (30.3%) for the six months ended June 30, 2024, compared to the prior year, primarily due to increased earning asset yields and the impact of the Blackhawk acquisition[176] - The provision for credit losses was $726,000 for the first six months of 2024, compared to a benefit of $359,000 in the same period of 2023[179] - Total other income increased by 11.8% year-over-year, driven by higher insurance commissions, service charges, and mortgage banking revenue[180] Total other expense increased by 28.3%, primarily due to higher salaries and amortization of intangibles related to the Blackhawk acquisition[183] Analysis of Consolidated Balance Sheets The balance sheet analysis reveals a decrease in the investment portfolio and a slight decline in the loan portfolio, with notable concentrations in agriculture and commercial real estate, while deposits increased on an average basis - The investment portfolio decreased by $52.6 million from December 31, 2023, to June 30, 2024, primarily due to sales, paydowns, calls, and maturities[187] - Total loans decreased by $19.9 million (0.4%) since year-end 2023, mainly due to seasonal paydowns in commercial and industrial loans, partially offset by seasonal increases in agricultural loans[189] - The company has significant loan concentrations in other grain farming ($490.2 million), lessors of non-residential buildings ($1.07 billion), and lessors of residential buildings ($562.3 million)[191][203] Loan Quality and Allowance for Credit Losses Credit quality improved with nonperforming loans decreasing to $19.1 million, while the allowance for credit losses stood at $68.3 million, deemed adequate by management Nonperforming Assets (in thousands) | Category | June 30, 2024 (in thousands) | December 31, 2023 (in thousands) | | :--- | :--- | :--- | | Nonaccrual loans | $17,854 | $18,832 | | Modified loans (performing) | $1,225 | $1,296 | | Total nonperforming loans | $19,079 | $20,128 | | Repossessed assets | $1,478 | $1,164 | | Total nonperforming assets | $20,557 | $21,292 | Allowance for Credit Losses Ratios | Ratio | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :--- | :--- | :--- | | Ratio of annualized net charge-offs to average loans | 0.04% | 0.00% | | Ratio of allowance for credit losses to loans outstanding | 1.23% | 1.22% | | Ratio of allowance for credit losses to nonperforming loans | 358% | 315% | Capital Resources The company maintains a strong capital position, with all regulatory capital ratios exceeding 'well-capitalized' standards, and stockholders' equity increased to $813.6 million by June 30, 2024 - Stockholders' equity increased by $20.4 million (2.6%) to $813.6 million in the first six months of 2024, driven by $40.2 million in net income, offset by $10.9 million in dividends and a $10.6 million decrease from the change in market value of available-for-sale securities[231] Regulatory Capital Ratios (Company) | Ratio | June 30, 2024 | December 31, 2023 | Well-Capitalized Minimum | | :--- | :--- | :--- | :--- | | Common equity tier 1 capital | 12.24% | 11.62% | > 7.00% | | Tier 1 capital | 12.65% | 12.02% | > 8.50% | | Total capital | 15.46% | 14.84% | > 10.50% | | Tier 1 leverage | 10.04% | 9.33% | > 4.00% | Liquidity The company maintains sufficient liquidity through cash flows, asset conversions, deposits, and various borrowing facilities, including $120 million in federal fund lines and $1.63 billion from FHLB - The company has multiple sources of liquidity, including $120 million in available overnight federal fund lines and approximately $1.63 billion in additional borrowing capacity from the Federal Home Loan Bank (FHLB)[242][243] - Off-balance sheet commitments, primarily unused lines of credit, totaled $1.28 billion as of June 30, 2024[247] Item 3. Quantitative and Qualitative Disclosures About Market Risk There has been no material change in the company's market risk since December 31, 2023, with further details available in the 2023 Annual Report on Form 10-K - There has been no material change in the market risk faced by the Company since December 31, 2023[250] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2024, with no material changes to internal controls over financial reporting during the quarter - Management concluded that the Company's disclosure controls and procedures are effective as of June 30, 2024[251] Part II Item 1. Legal Proceedings The company is involved in ordinary course litigation, but management does not expect any existing claims to materially affect its financial position or operations - The Company is subject to claims and lawsuits that arise in the ordinary course of business, but management does not expect them to have a material adverse effect on the company's financial condition[252] Item 1A. Risk Factors No material changes have occurred to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2023 - The company refers to the risk factors described in its Annual Report on Form 10-K for the year ended December 31, 2023, indicating no material changes[253] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase equity securities during Q2 2024, with approximately $4.1 million remaining available under its stock repurchase program Issuer Purchases of Equity Securities | Period | Total Number of Shares Purchased | Average Price Paid per Share | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in thousands) | | :--- | :--- | :--- | :--- | | April 1, 2024 - April 30, 2024 | — | $— | $4,061,000 | | May 1, 2024 - May 31, 2024 | — | $— | $4,061,000 | | June 1, 2024 - June 30, 2024 | — | $— | $4,061,000 | | Total | — | $— | $4,061,000 | Item 5. Other Information On August 7, 2024, the company amended a Registration Rights Agreement from its 2021 LINCO acquisition, extending the resale registration statement's effectiveness for three years - On August 7, 2024, the Company amended a Registration Rights Agreement from its 2021 LINCO acquisition, agreeing to keep the resale registration statement effective for three years following the amendment date[260] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications, an amended Registration Rights Agreement, and XBRL data files