10-K: First Mid Bancshares Reports Strong 2025 Growth

First Mid Bancshares, Inc. reported a significant increase in net income and diluted earnings per share for fiscal year 2025, driven by organic loan growth and improved net interest margin.

Summary

• Net income increased to $91.7 million in 2025, up from $78.9 million in 2024 and $68.9 million in 2023.
• Diluted earnings per share rose to $3.83 in 2025, compared to $3.30 in 2024 and $3.15 in 2023.
• Total assets reached $7.97 billion at December 31, 2025, an increase from $7.52 billion at December 31, 2024.
• Net loan balances grew by 6.0% to $5.94 billion at December 31, 2025, from $5.60 billion at December 31, 2024, primarily due to organic growth.
• Total deposit balances increased to $6.40 billion at December 31, 2025, from $6.06 billion at December 31, 2024, driven by growth in CDs, brokered CDs, and non-interest-bearing deposits.
• Net interest margin (tax effected) improved to 3.70% in 2025 from 3.34% in 2024, attributed to improved loan yields and decreased funding costs.
• Net interest income increased by $27.5 million (11.8%) to $256.2 million in 2025.
• Non-interest income decreased to $93.1 million in 2025 from $96.3 million in 2024, mainly due to losses on the sale of low-performing securities.
• Non-interest expenses increased to $222.2 million in 2025 from $215.0 million in 2024, primarily due to higher incentive compensation.
• Provision for credit losses increased to $9.9 million in 2025 from $5.6 million in 2024, reflecting an expected return to a normal credit cycle.
• Nonperforming loans increased to $31.9 million at December 31, 2025, from $29.8 million at December 31, 2024.
• The ratio of allowance for credit losses to nonperforming loans was 234.4% at December 31, 2025.
• Capital ratios remained strong, exceeding well-capitalized standards, with a Total Risk-based capital ratio of 15.67% and a Tier 1 leverage ratio of 11.07% at December 31, 2025.
• The Company acquired Ray Farm Management Services, Inc.'s customer list for $764,000 and a portion of AAdvantage Insurance Group LLC's customer list for $2.8 million during 2025.
• A merger agreement to acquire Two Rivers Financial Group, Inc. is pending, anticipated to close on February 28, 2026, involving approximately 2,556,140 shares of Company common stock.

Sentiment

Score: 8

Explanation: StockSavvy.ai views this as a strong performance, with significant increases in net income and EPS, robust loan growth, and improved net interest margin, despite an expected increase in credit loss provisions.

Positives

• Net income increased significantly by $12.85 million (16.3%) to $91.7 million in 2025.
• Diluted earnings per share grew to $3.83 in 2025, up from $3.30 in 2024.
• Net interest margin (tax effected) improved to 3.70% in 2025, reflecting effective loan pricing and investment portfolio management.
• Net interest income increased by $27.4 million (11.8%) in 2025, driven by organic growth in earning assets and decreased funding costs.
• Loan balances increased by $338.9 million (6.0%) in 2025, primarily due to strong organic growth within the established footprint.
• Total deposit balances increased to $6.40 billion in 2025, indicating successful efforts to attract and retain deposits.
• Wealth management revenues increased in 2025, with total assets under management reaching $6.6 billion.
• Insurance commissions increased in 2025 due to the full-year impact of the Mid Rivers Insurance Group acquisition and organic growth.
• The Company's capital position remains strong, with all regulatory capital ratios exceeding well-capitalized standards (e.g., Total Risk-based capital ratio of 15.67% vs. 10.5% minimum).
• Liquidity position is sufficient, with access to $1.6 billion in additional FHLB advances and a $15 million revolving credit agreement.
• Employee engagement survey in 2025 achieved 98% participation, indicating a positive workplace environment.
• The Company increased the starting rate of pay by an additional $1.00 per hour for the third consecutive year and implemented market pay adjustments for tenured employees.
• All salary ranges were increased by 4%, providing greater opportunities for growth and earning potential.
• Over a hundred hourly and salaried employees received spot bonuses for significant project work and core system conversion.
• A chronic condition management program was introduced at no cost to employees and covered dependents.
• Employees volunteered 18,685 hours in 2025, and the Company matched United Way donations, contributing over $165,000 to communities.

Negatives

• Non-interest income decreased to $93.1 million in 2025 from $96.3 million in 2024, primarily due to $2.5 million in net losses on the sale of low-performing securities.
• Nonperforming loans increased to $31.9 million at December 31, 2025, from $29.8 million at December 31, 2024.
• Provision for credit losses increased to $9.9 million in 2025 from $5.6 million in 2024, reflecting an expected return to a normal credit cycle, which implies higher anticipated loan losses.
• Net charge-offs increased to $5.2 million in 2025 from $4.1 million in 2024, including significant charge-offs on commercial real estate, agricultural operating, and commercial operating loans.
• Repossessed assets increased to $2.9 million at December 31, 2025, from $2.7 million at December 31, 2024.
• Employee volunteer hours decreased to 18,685 in 2025 from 22,321 in 2024.
• The Company was liability sensitive on a cumulative basis through the twelve-month time horizon at December 31, 2025, indicating that future increases in interest rates could adversely affect net interest income.
• Economic Value of Equity (EVE) is projected to decrease with sudden and sustained increases in interest rates (e.g., -5.3% for a +200 basis point shock).

Risks

• Loan customers or other counterparties may not be able to perform their contractual obligations, negatively impacting earnings.
• Overall economic conditions, including market disruptions, could increase credit losses, especially given the $4.1 billion in loans secured by real estate.
• A significant decline in real estate values could adversely affect financial condition and results of operations.
• Concentrations in specific industries (e.g., other grain farming, lessors of non-residential buildings, lessors of residential buildings, hotels and motels) expose the Company to risks if those industries face downturns.
• Commercial and commercial real estate loans generally involve higher credit risks than residential and consumer loans, with repayment dependent on underlying asset operation and market conditions.
• The allowance for credit losses may prove inadequate or be negatively affected by unanticipated adverse changes in the economy, market conditions, or specific customer/industry events.
• Dependence on the accuracy and completeness of information furnished by customers and counterparties could lead to unfavorable transactions if information is inaccurate or misleading.
• Changes in market interest rates may negatively affect net interest income, the Company's largest revenue source, by impacting the spread between interest earned and paid.
• Declines in the value of securities held in the investment portfolio, due to market factors or credit risk, could negatively affect earnings and capital, potentially leading to other-than-temporary impairments.
• The Company may not have sufficient cash or access to cash to satisfy current and future financial obligations, including demands for loans and deposit withdrawals, due to liquidity risk.
• A failure in or breach of the Company's operational or security systems, or those of its third-party service providers (including cyber-attacks), could disrupt business, result in data misuse, damage reputation, and increase costs.
• Goodwill impairment could occur if the Company's stock price declines or the fair value of its business units decreases, leading to a material charge.
• Human error, inadequate internal processes and systems, and external events (e.g., fraud, compliance violations, inability to deliver services) pose operational risks that could harm reputation and financial performance.
• Various business risks, such as changes in customer behavior, increased competition, new litigation, environmental liabilities, acts of war/terrorism, adverse weather, and inability to attract/retain skilled employees, could negatively affect financial performance.
• Difficult economic conditions and market disruption could adversely impact the banking industry and the Company's business, financial condition, or results of operations.
• The Company's profitability depends significantly on economic conditions in its primary geographic region (Illinois), making it vulnerable to regional downturns.
• Decline in the strength and stability of other financial institutions could affect the Company's ability to engage in routine funding transactions and expose it to credit risk.
• Environmental, Social and Governance (ESG) risks, including climate risk and social justice issues, could adversely affect the Company's reputation and stock price.
• Future issuance of additional common stock or other equity securities could dilute the ownership interest of existing stockholders.
• Failure to make favorable acquisitions or successfully integrate acquired businesses could impact the Company's growth.
• Government regulation, legislation, and policy changes, or new regulatory accounting standards, could adversely affect the Company's business and results of operations.
• Operating in a highly competitive industry and market area from various financial institutions could impact the Company's market share and profitability.

Future Outlook

The Company anticipates the acquisition of Two Rivers Financial Group, Inc. to be completed on February 28, 2026. The increase in provision for credit losses for 2025 was expected as the industry returns to a normal credit cycle. The Company plans to adopt ASU 2025-08 prospectively as of January 1, 2026. Management does not currently anticipate that the Volcker Rule will have a material effect on the operations of the Company or First Mid Bank.

Management Comments

• "The Company is committed to building a workplace that attracts, develops, and retains top talent."
• "Creating and maintaining a work environment where every employee is treated with dignity and respect is fundamental to ensuring they can fully focus on performing their jobs to the best of their ability."
• "The Company recognizes that its success depends on continually strengthening its culture of inclusion, where all employees feel valued and empowered to contribute."
• "The Company believes that growth of revenues and its customer base is vital to the goal of increasing the value of its shareholders investment."
• "Management attempts to grow in two primary ways: by organic growth through adding new customers and selling more products and services to existing customers; and by strategic acquisitions."
• "The Company strives for employee engagement at all levels of the organization."
• "The Company strives to provide a competitive dividend as well as the opportunity for stock price appreciation."
• "Management believes that the overall estimate of the allowance for credit losses appropriately accounts for probable losses attributable to current exposures."
• "Management believes that the Company and its subsidiary bank was in compliance with all the existing covenants at December 31, 2025 and 2024."

Industry Context

StockSavvy.ai notes that First Mid Bancshares operates in a highly regulated and competitive banking environment, facing competition from various financial institutions. The increase in provision for credit losses in 2025 is consistent with a broader industry trend of returning to a 'normal credit cycle' after periods of potentially lower provisions. The company's focus on organic growth and strategic acquisitions aligns with common strategies for regional banks seeking to expand market share and diversify revenue streams. The emphasis on ESG risks reflects increasing stakeholder scrutiny across the financial sector.

Comparison to Industry Standards

• First Mid's credit loss experience, with average net charge-offs amounting to $3.1 million (0.06% of total loans) over the past five years and nonperforming loans at $31.9 million (0.53% of total loans) at December 31, 2025, has historically compared well with peer financial institutions and continues to do so.
• The Company's capital ratios (Total Risk-based capital ratio of 15.67%, Tier 1 Risk-based capital ratio of 13.55%, Common Equity Tier 1 capital ratio of 13.16%, and Tier 1 Leverage ratio of 11.07% at December 31, 2025) exceed the 'well-capitalized' standards (10.5%, 8.5%, 7.0%, and 4.0% respectively), indicating a strong capital position relative to regulatory benchmarks.
• The Company's interest rate risk policy establishes maximum decreases in net interest income of 5% for a 100 basis point rate shift and 10% for a 200 basis point rate shift. At December 31, 2025, the estimated changes in Economic Value of Equity (EVE) were within policy guidelines of +/-10% for a 100 basis point shock and +/-20% for a 200 basis point shock, demonstrating effective risk management within established thresholds.

Management Changes

Corporate Governance

Legal Proceedings

• The Company and its subsidiaries may be involved in litigation common to the industry from time to time. None of the existing claims are believed to be individually material at this time, though their outcome cannot be predicted with certainty.

Related Party Transactions

• Loans to related parties totaled approximately $130.3 million at December 31, 2025, a decrease from $247.9 million at December 31, 2024.
• New loans to related parties amounted to $17.2 million in 2025.
• Loan repayments from related parties totaled $134.9 million in 2025.
• Deposits from related parties held by First Mid Bank totaled $158.5 million at December 31, 2025, an increase from $61.2 million at December 31, 2024.

Stakeholder Impact

• Shareholders: Positive impact from increased net income, diluted EPS, and strong capital ratios. Potential for stock price appreciation and competitive dividends. Potential for dilution from future equity issuances for acquisitions or capital maintenance.
• Employees: Positive impact from increased starting pay, market pay adjustments, salary range increases, spot bonuses, enhanced benefits (chronic condition management program), tuition reimbursement, and professional development opportunities.
• Customers: Benefits from expanded services through recent acquisitions (e.g., insurance, farm management), continued focus on high-value customer experiences, and a broad range of lending and deposit services.
• Communities: Positive impact from employee volunteerism (18,685 hours in 2025) and corporate donations (over $165,000 to United Way in 2025).
• Creditors: Enhanced confidence due to the Company's strong capital position and sufficient liquidity, ensuring its ability to meet financial obligations.

Next Steps

• Completion of the Two Rivers Merger, anticipated on February 28, 2026.
• Annual Meeting of Shareholders to be held on April 29, 2026.
• Company plans to adopt ASU 2025-08 prospectively as of January 1, 2026.
• Continued focus on organic growth and strategic acquisitions.
• Ongoing monitoring of interest rate sensitivity and risk management.
• Potential discretionary share repurchases under the 2025 Repurchase Program, which has approximately $46.8 million in remaining capacity.

Key Dates

Recommendation

The company demonstrated robust financial performance in 2025 with significant increases in net income and diluted EPS, driven by strong organic loan growth and an improved net interest margin. Its capital ratios remain well above regulatory requirements, indicating financial stability. Strategic acquisitions in wealth management and insurance, along with a pending merger, suggest continued growth potential. While there's an expected increase in credit loss provisions and non-interest income saw a slight dip due to securities sales, the overall trajectory and management's proactive approach to risk and employee engagement are highly favorable. The share repurchase program also signals confidence in future value.

Keywords

First Mid Bancshares, FMBH, Banking, Financial Services, Wealth Management, Insurance, SEC Filing, 10-K, Annual Report, Financial Performance, Net Income, EPS, Loans, Deposits, Net Interest Margin, Credit Quality, Acquisitions, Corporate Governance, Risk Management, Capital Ratios, Illinois, Missouri, Wisconsin, Texas, Community Banking