First Mid(FMBH) - 2025 Q2 - Quarterly Report

FORM 10-Q Filing Information 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][3] 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 ITEM 1. FINANCIAL STATEMENTS 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 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] Condensed Consolidated Statements of Income 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][139] Condensed Consolidated Statements of Comprehensive Income 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] Condensed Consolidated Statements of Changes in Stockholders' Equity 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][205] Condensed Consolidated Statements of Cash Flows 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][213] Notes to Condensed Consolidated Financial Statements 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 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] - 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] Note 2 - Earnings Per Share 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 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][41] - 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][41] Note 4 - Loans and Allowance for Credit Losses 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] 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][175] Note 5 - Goodwill and Intangible Assets 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] 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 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] - 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][194] Note 7 - Fair Value of Assets and Liabilities 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][102][103] 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] Note 8 - Leases 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 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] 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 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][127] Note 11 - Commitments 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][144] Note 12 - Subsequent Events 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] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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 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] 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] - 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][140] Critical Accounting Policies and Use of Significant Estimates 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] Results of Consolidated Operations 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 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] - 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][157] 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 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] Other Income 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] - Bank owned life insurance income increased by $580,000 due to a gain recognized on a death claim filed in 2025[158] Other Expense 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] - Nonrecurring technology project expenses contributed to increases in occupancy and equipment and legal and professional fees[162] Income Taxes 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] Analysis of Consolidated Balance Sheets 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 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] - The majority of the investment securities are highly rated, with significant portions in AAA and AA +/- categories[163] 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] 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 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] - Repossessed assets decreased by $1.0 million during the first six months of 2025, mainly due to sales of repossessed assets[176] Loan Quality and Allowance for Credit Losses 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][178] - 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] 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 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] - Approximately 99% of the Company's deposit accounts are less than $250,000, with an average account balance of $23,000[186] Repurchase Agreements and Other Borrowings 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] - 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] Interest Rate Sensitivity 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] - 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] Capital Resources 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] - 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] Stock Plans 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] - 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] - 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][211] 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] - 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] 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 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] - 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] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 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] ITEM 4. CONTROLS AND PROCEDURES 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] - No material changes occurred in the Company's internal control over financial reporting during the last fiscal quarter[217] PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS 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][219] ITEM 1A. RISK FACTORS 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] - 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] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 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][221] ITEM 3. DEFAULTS UPON SENIOR SECURITIES This section states that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[222] ITEM 4. MINE SAFETY DISCLOSURES This section indicates that mine safety disclosures are not applicable to the Company - Mine safety disclosures are not applicable to the Company[223] ITEM 5. OTHER INFORMATION 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] ITEM 6. EXHIBITS 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][227] 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]