8-K: First Mid Bancshares Reports Solid First Quarter 2024 Results, Driven by Insurance Revenue and Strong Asset Quality

First Mid Bancshares announced a net income of $20.5 million for the first quarter of 2024, with record noninterest income driven by insurance revenues and strong asset quality.

Summary

• First Mid Bancshares reported a net income of $20.5 million, or $0.86 diluted earnings per share, for the first quarter of 2024.
• Adjusted net income was $22.3 million, or $0.93 diluted earnings per share.
• The company experienced a decrease in net interest income by $2.0 million compared to the previous quarter, primarily due to lower loan balances and less accretion income.
• However, net interest income increased by $12.3 million compared to the first quarter of 2023, largely due to the acquisition of Blackhawk.
• Noninterest income reached a record high of $24.5 million, driven by a significant increase in insurance revenues.
• Total loans decreased by $81.3 million to $5.50 billion, while total deposits increased by $119.3 million to $6.24 billion.
• The company's asset quality remained strong, with minimal net charge-offs of $0.4 million and a non-performing loan ratio of 0.36%.
• The allowance for credit losses (ACL) ended the period at $67.9 million, with an ACL to total loans ratio of 1.24%.
• The company's net interest margin was 3.25%, a slight decrease from the previous quarter.
• Noninterest expenses totaled $53.4 million, including $2.3 million in nonrecurring integration costs.
• The company's efficiency ratio was 59.1% for the quarter.
• The Board of Directors declared a regular quarterly dividend of $0.23 per share.

Sentiment

Score: 7

Explanation: The sentiment is positive due to strong noninterest income, good asset quality, and a dividend declaration, but tempered by a slight decrease in net interest income and loan balances.

Positives

• The company achieved a record high in noninterest income, driven by insurance revenues.
• Asset quality remained strong with minimal net charge-offs and a low non-performing loan ratio.
• The company's capital levels remained strong and above well-capitalized levels.
• Total deposits increased by $119.3 million, indicating strong customer confidence.
• The company was recognized as a Top Workplace by USA Today, reflecting a positive work environment.
• Tangible book value per common share increased to $22.49.
• The company's liquidity position is strong.

Negatives

• Net interest income decreased by $2.0 million compared to the previous quarter due to lower loan balances and less accretion income.
• Total loans decreased by $81.3 million from the prior quarter.
• The net interest margin declined by 8 basis points compared to the prior quarter.
• Noninterest expenses increased by $11.8 million compared to the first quarter of 2023.

Risks

• Changes in interest rates could impact the company's net interest income and profitability.
• General economic conditions and those in the market areas of First Mid could affect loan demand and credit quality.
• Legislative and regulatory changes could impact the company's operations and financial performance.
• The quality or composition of First Mid's loan or investment portfolios and the valuation of those investment portfolios could pose risks.
• Competition in the financial services market could affect the company's ability to attract and retain customers.
• The impact of the global COVID-19 pandemic on First Mid's businesses remains a potential risk.

Future Outlook

The document includes forward-looking statements regarding First Mid's pricing and fee trends, credit quality, liquidity, new business results, expansion plans, anticipated expenses, and planned schedules, but cautions that actual results could differ materially due to various risks and uncertainties.

Management Comments

• Joe Dively, Chairman and Chief Executive Officer, stated he was pleased with the start of 2024, highlighting the benefits of the Blackhawk acquisition.
• He noted the stable core margin, significant liquidity, and continued asset quality strength.
• He also emphasized the company's revenue diversification and the record high in noninterest income due to insurance revenues.
• He expressed pride in the national recognition of being named a top workplace by USA Today.

Industry Context

The results reflect a period of stability and growth for First Mid following an eventful year for the banking industry, with the acquisition of Blackhawk contributing to increased revenue and diversification. The focus on asset quality and liquidity is consistent with industry trends emphasizing financial stability.

Comparison to Industry Standards

• First Mid's net interest margin of 3.25% is within the range of regional banks, but slightly lower than some peers with higher loan yields.
• The efficiency ratio of 59.1% is comparable to other community banks, indicating a reasonable level of operational efficiency.
• The company's asset quality metrics, with a non-performing loan ratio of 0.36%, are better than the industry average, suggesting a conservative approach to lending.
• Compared to larger national banks, First Mid's growth is more focused on organic expansion and strategic acquisitions within its regional footprint.
• The increase in noninterest income, particularly from insurance revenues, is a positive differentiator compared to banks more reliant on traditional lending.

Stakeholder Impact

• Shareholders will benefit from the declared dividend and the company's strong financial performance.
• Employees will benefit from the company's recognition as a Top Workplace.
• Customers will benefit from the company's strong financial position and continued service offerings.
• Creditors will be reassured by the company's strong capital levels and asset quality.

Next Steps

• The company will continue to focus on managing funding costs and relationship pricing.
• The company will continue to integrate the Blackhawk acquisition.
• The company will continue to monitor and manage asset quality.
• The company will pay a quarterly dividend of $0.23 per share on May 31, 2024.

Key Dates

Keywords

financial results, net income, noninterest income, insurance revenues, asset quality, net interest margin, loan portfolio, deposits, dividends, banking