UNITED STATES
SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2026
Or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-36434
(Exact name of Registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization)
(I.R.S. employer identification no.)
(Address of principal executive offices)
(Zip code)
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock
FMBH
NASDAQ Global Market
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ☒
Accelerated filer ☐
Non-accelerated filer ☐
Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
As of May 8, 2026, 26,615,796 common shares, $4.00 par value, were outstanding.
PART I
ITEM 1. FINANCIAL STATEMENTS
First Mid Bancshares, Inc.
Condensed Consolidated Balance Sheets (unaudited)
(In thousands, except share data)
March 31, 2026
December 31, 2025
Assets
Cash and due from banks:
Non-interest-bearing
$
64,893
57,224
Interest-bearing
411,190
197,620
Federal funds sold
949
76
Cash and cash equivalents
477,032
254,920
Certificates of deposit
3,060
1,740
Investment securities:
Available-for-sale, at fair value (amortized cost of $1,325,037 and $1,215,813 at March 31, 2026 and December 31, 2025, respectively)
1,176,071
1,076,883
Held-to-maturity, at amortized cost (estimated fair value of $2,271 and $2,288 at March 31, 2026 and December 31, 2025, respectively)
2,271
2,288
Equity securities, at fair value
4,717
4,588
Loans held for sale, at fair value
4,909
5,203
Loans
6,939,367
6,006,171
Less allowance for credit losses
(86,814
)
(74,875
Net loans
6,852,553
5,931,296
Interest receivable
46,753
39,949
Other real estate owned, net
5,529
2,857
Premises and equipment, net
101,935
90,782
Goodwill, net
203,391
Intangible assets, net
73,956
49,625
Bank owned life insurance
186,042
174,915
Right of use assets
13,411
12,674
Current tax assets
—
714
Deferred tax assets
61,834
45,453
Other assets
75,153
69,380
Total assets
9,288,617
7,966,658
Liabilities and stockholders’ equity
Deposits:
1,489,747
1,392,534
6,057,892
5,002,739
Total deposits
7,547,639
6,395,273
Repurchase agreements with customers
208,811
196,716
Interest payable
6,600
5,782
Other borrowings
295,106
270,000
Subordinated debt, net
60,072
60,008
Junior subordinated debt, net
34,022
24,454
Lease liabilities
13,954
13,210
Current tax liabilities
10,602
Other liabilities
35,185
42,523
Total liabilities
8,211,991
7,007,966
Commitments and contingent liabilities (Note 12)
Stockholders’ equity:
Common stock ($4 par value; authorized 45,000,000 shares; issued 27,307,663 and 24,671,969 shares in March 31, 2026 and December 31, 2025, respectively; outstanding 26,609,307 and 23,986,299 shares in March 31, 2026 and December 31, 2025, respectively)
111,231
100,688
Additional paid-in capital
614,974
516,984
Retained earnings
483,886
463,543
Deferred compensation
(205
2,654
Accumulated other comprehensive loss
(108,708
(101,301
Treasury stock, at cost (698,356 and 685,670 shares in March 31, 2026 and December 31, 2025)
(24,552
(23,876
Total stockholders’ equity
1,076,626
958,692
Total liabilities and stockholders’ equity
See accompanying notes to unaudited condensed consolidated financial statements.
2
Condensed Consolidated Statements of Income (unaudited)
Three months ended
March 31,
(In thousands, except per share data)
2026
2025
Interest income:
Interest and fees on loans
90,986
79,918
Interest on investment securities
Taxable
6,012
4,982
Exempt from federal income tax
1,873
1,795
Interest on certificates of deposit
21
36
Interest on federal funds sold
1
Interest on deposits with other financial institutions
1,726
827
Total interest income
100,620
87,559
Interest expense:
Interest on deposits
24,774
23,722
Interest on repurchase agreements with customers
1,025
1,180
Interest on other borrowings
2,398
1,831
Interest on subordinated debt
1,170
Interest on junior subordinated debt
468
Total interest expense
29,835
28,150
Net interest income
70,785
59,409
Provision for credit losses
2,598
1,652
Net interest income after provision for credit losses
68,187
57,757
Other income:
Wealth management revenues
6,375
5,800
Insurance commissions
10,807
9,925
Service charges
3,080
2,901
Investment securities gains (losses), net
20
(181
Mortgage banking revenue, net
721
711
ATM / debit card revenue
4,135
3,646
1,340
1,687
Other income
(37
375
Total other income
26,441
24,864
Other expense:
Salaries and employee benefits
35,016
31,748
Net occupancy and equipment expense
9,826
8,479
Net other real estate owned expense
212
101
FDIC insurance expense
940
849
Amortization of intangible assets
3,301
3,231
Stationery and supplies
302
431
Legal and professional
2,700
3,076
ATM / debit card expense
1,807
Marketing and donations
824
852
Other expense
5,797
3,874
Total other expense
60,725
54,472
Income before income taxes
33,903
28,149
Income taxes
7,576
5,978
Net income
26,327
22,171
Per share data:
Basic net income per common share
1.06
0.93
Diluted net income per common share
3
Condensed Consolidated Statements of Comprehensive Income (unaudited)
(In thousands)
Other comprehensive income (loss)
Unrealized gains (losses) on available-for-sale securities, net of taxes of $2,778 and ($2,594) for three months ended March 31, 2026 and 2025, respectively
(7,392
6,902
Less: reclassification adjustment for realized gains (losses) included in net income, net of taxes of ($5) and $50 for three months ended March 31, 2026 and 2025, respectively
15
(131
Other comprehensive income (loss), net of taxes
(7,407
7,033
Comprehensive income
18,920
29,204
4
Condensed Consolidated Statements of Changes in Stockholders’ Equity (unaudited)
For the three months ended March 31, 2026
CommonStock
AdditionalPaid-In-Capital
RetainedEarnings
DeferredCompensation
AccumulatedOtherComprehensiveLoss
TreasuryStock
Total
Other comprehensive income, net of tax
Dividends on common stock ($.25 per share)
(5,984
Issuance of 81,913 restricted common shares pursuant to 2017 stock incentive plan, net of forfeitures
328
3,241
3,569
Issuance of 6,975 common shares pursuant to 2017 stock incentive plan, net of forfeitures
28
276
304
Issuance of 6,975 common shares pursuant to the employee stock purchase plan
194
222
Issuance of 2,539,831 common shares pursuant to acquisition of Two Rivers Financial Group, Inc.
10,159
93,999
104,158
Purchase of 12,686 treasury shares
(500
(3,563
(176
(3,739
Grant of restricted stock units pursuant to the 2017 stock incentive plan
2,299
Release of restricted stock units pursuant to 2017 stock incentive plan
(2,070
Vested restricted shares/units compensation expense
51
704
755
5
For the three months ended March 31, 2025
December 31, 2024
100,258
512,810
395,189
2,756
(142,383
(22,239
846,391
Dividends on common stock ($.24 per share)
(5,727
Issuance of 73,618 restricted common shares pursuant to 2017 stock incentive plan, net of forfeitures
294
2,575
2,869
Issuance of 5,600 common shares pursuant to 2017 stock incentive plan, net of forfeitures
22
196
218
Issuance of 6,891 common shares pursuant to the employee stock purchase plan
188
216
(2,779
(2,960
1,791
(1,634
49
532
581
March 31, 2025
100,602
515,975
411,633
509
(135,350
(22,420
870,949
6
Condensed Consolidated Statements of Cash Flows (unaudited)
Three months ended March 31,
Cash flows from operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion, net
5,356
4,996
Change in cash surrender value of bank owned life insurance
(1,340
(1,200
Gain on cash surrender value of bank owned life insurance
(487
Stock-based compensation expense
865
688
Operating lease payments
(852
(822
Loss (gain) on sale of investment securities, net
(20
181
Loss on sales and write-downs of other real estate owned, net
52
80
Loss on sale of premises and equipment
14
Gain on sale of loans held for sale, net
(927
(641
Loss on repayment of subordinated debt
289
Gain on repayment of other borrowings
(85
Decrease (increase) in accrued interest receivable
(2,396
1,186
Increase in accrued interest payable
31
1,486
Origination of loans held for sale
(34,261
(25,500
Proceeds from sale of loans held for sale
33,924
29,111
Decrease (increase) in other assets
(2,245
21,118
Decrease in other liabilities
(2,041
(6,353
Net cash provided by operating activities
25,077
47,884
Cash flows from investing activities:
Proceeds from maturities of certificates of deposits
840
980
Purchases of certificates of deposits
(2,160
Proceeds from sales of investment securities available-for-sale
167,803
8,291
Proceeds from maturities of investment securities available-for-sale
24,027
23,927
Purchases of investment securities available-for-sale
(131,846
Purchase of investment securities held-to-maturity
(3
(21
Net increase in loans
(63,743
(31,149
Purchases of premises and equipment
(1,960
(1,930
Proceeds from sale of premises and equipment
3,500
Proceeds from sales of other real property owned, net
270
33
Proceeds from bank owned life insurance death benefit
1,414
Purchase of other investments
(1,984
Net cash provided by acquisition
88,269
Net cash provided by investing activities
79,533
4,545
Cash flows from financing activities:
Net increase in deposits
111,573
73,284
Increase in repurchase agreements with customers
12,095
15,650
Proceeds from other borrowings
54,000
Repayment of other borrowings
(206
(101,435
Repayment of subordinated debt
(8,381
Proceeds from issuance of common stock
524
434
Purchase of treasury stock
Dividends paid on common stock
Net cash provided by financing activities
117,502
27,825
Increase in cash and cash equivalents
222,112
80,254
Cash and cash equivalents at beginning of period
121,216
Cash and cash equivalents at end of period
201,470
7
Supplemental disclosures of cash flow information
Cash paid (received) during the period for:
Interest
29,017
26,805
Income taxes, net of refunds
US Federal
(1,009
State of Illinois
(154
State of Wisconsin
(80
Other
(28
Total income taxes, net of refunds
(286
(1,191
Supplemental disclosures of noncash investing and financing activities
Loans transferred to other real estate owned
2,023
Fixed assets transferred to other real estate owned
950
Initial recognition of right-of-use assets in exchange for lease liabilities
57
668
Supplemental disclosures for purchases of capital stock
Fair value of assets acquired
1,186,786
11,449
Consideration paid:
Cash paid
9,000
Common stock issued
104,159
Total consideration paid
104,161
Fair value of liabilities assumed
1,082,625
2,449
8
Note 1 -- Basis of Accounting and Consolidation
The unaudited condensed consolidated financial statements include the accounts of First Mid Bancshares, Inc. (“Company”) and its wholly owned subsidiaries: First Mid Bank & Trust, N.A. (“First Mid Bank”), Two Rivers Bank & Trust (“Two Rivers Bank”), First Mid Wealth Management Company (“First Mid Wealth Management”), First Mid Insurance Group, Inc. (“First Mid Insurance”), and First Mid Captive, Inc. (“the Captive”). All significant intercompany balances and transactions have been eliminated in consolidation. The financial information reflects all adjustments which, in the opinion of management, are necessary for a fair presentation of the results of the interim periods ended March 31, 2026 and 2025, and all such adjustments are of a normal recurring nature. Certain amounts in the prior year’s consolidated financial statements may have been reclassified to conform to the March 31, 2026 presentation and there was no impact on net income or stockholders’ equity. The results of the interim period ended March 31, 2026 are not necessarily indicative of the results expected for the year-ending December 31, 2026. The 2025 year-end consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America.
The unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X and do not include all the information required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements and related footnote disclosures, although the Company believes that the disclosures made are adequate to make the information not misleading. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2025 Annual Report on Form 10-K.
Acquisitions
Downs Insurance Agency, Inc. During the quarter ended March 31, 2026, Downs Insurance Agency, Inc. (DIA) customer list was acquired by the Company for a purchase price of $1.4 million and immediately assigned to First Mid Insurance Group.
Two Rivers Financial Group, Inc. On October 29, 2025, the Company and Star Sub LLC, a newly formed Iowa limited liability company and wholly-owned subsidiary of the Company, entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Two Rivers Financial Group, Inc., an Iowa corporation (Two Rivers), pursuant to which, among other things, the Company agreed to acquire 100% of the issued and outstanding shares of Two Rivers pursuant to a business combination whereby Two Rivers would merge with and into Star Sub LLC, whereupon the separate corporate existence of Two Rivers would cease and Star Sub LLC would continue as a surviving company and a wholly-owned subsidiary of the Company (the “Merger”).
Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger, each share of common stock of Two Rivers issued and outstanding immediately prior to the effective time of the Merger (other than shares held in treasury by Two Rivers) was converted into and became the right to receive 1.225 shares of common stock of the Company, and cash-in-lieu of fractional shares, less any applicable taxes required to be withheld, and subject to certain potential adjustments. On an aggregate basis, the total consideration payable by the Company at the closing of the Merger to Two Rivers shareholders and equity award holders was 2,539,831 shares of the Company common stock valued at $104.2 million and $2,000 of cash-in-lieu of fractional shares.
It is anticipated that Two Rivers Bank will be merged with and into First Mid Bank in June 2026. At which time, Two Rivers Bank offices will become branches of First Mid Bank.
Ray Farm Management During the quarter ended December 31, 2025, Ray Farm Management Services, Inc.’s (RFMS) customer list was acquired by the Company for a purchase price of $764,000 and immediately assigned to First Mid Wealth Management.
AAdvantage Insurance Group LLC During the quarter ended September 30, 2025, a portion of AAdvantage Insurance Group LLC’s (AAIG) customer list was acquired by the Company for a purchase price of $2.8 million and immediately assigned to First Mid Insurance Group.
Mid Rivers Insurance Group, Inc. During the quarter ended September 30, 2024, Mid Rivers Insurance Group, Inc. (MRIG) was acquired by the Company for a purchase price of $10.1 million and immediately merged into First Mid Insurance Group.
Note 5 and 8 provide further information on the intangibles acquired in the above acquisitions.
9
The Company operates as a single segment entity for financial reporting purposes. The Chief Financial and Risk Officer, Jordan Read (CFO), serves as the Company’s chief operating decision maker (CODM). The CODM allocates resources and assesses performance of the Company based on the consolidated performance, excluding all significant intercompany balances and transactions, of the Company and its wholly owned subsidiaries and does not significantly utilize disaggregated segment financial information for decision-making and resource allocation. As of March 31, 2026, management has reviewed the requirements of generally accepted accounting principles and has determined that no additional segment disclosures are required. Specifically,
Based on this assessment the Company’s financial statement disclosures fully comply with generally accepted accounting principles, and no additional qualitative segment disclosures are necessary.
The components of accumulated other comprehensive loss included in stockholders’ equity as of March 31, 2026 and December 31, 2025 are as follows (in thousands):
Unrealized Losses on Securities
Net unrealized losses on securities available-for-sale
(148,966
Tax benefit
40,258
Balance at March 31, 2026
(138,930
37,629
Balance at December 31, 2025
Amounts reclassified from accumulated other comprehensive loss and the affected line items in the statements of income during the three months ended March 31, 2026 and 2025, were as follows (in thousands):
Amounts Reclassified from Other Comprehensive Income (Loss)
Affected Line Item in the
Statements of Income
Realized gain (loss) on available-for-sale securities, net
Investment securities gains (losses), net (total reclassified amount before tax)
Income tax benefit (expense)
(5
50
Total reclassifications out of accumulated other comprehensive income (loss)
Net reclassified amount
See “Note 3 – Investment Securities” for more detailed information regarding unrealized losses on available-for-sale securities.
10
In November 2024, the Financial Accounting Standards Board issued ASU 2024-03 “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” to require additional disclosures within the notes to the financial statements about certain expense items. Specifically, disaggregation of income statement captions that contain expenses within the following five categories is required: (1) purchases of inventory, (2) employee compensation, (3) depreciation, (4) intangible asset amortization, and (5) depreciation, depletion, and amortization (“DD&A”) costs recognized as part of oil- and gas-producing activities or other amounts of depletion expense. Further, this update requires disclosure of the total amount of selling expenses and the Company’s definition of selling expenses. This update provides a practical expedient for banks and bank holding companies to continue presenting salaries and employee benefits in conformity with SEC Rule 210.9-04 instead of requiring those entities to apply the employee compensation definition included in Subtopic 220-40. The amendments in this update may be applied on either a prospective or retrospective basis and will be effective for the Company beginning with the annual reporting period ending December 31, 2027, and interim reporting periods beginning January 1, 2028. The Company does not expect adoption of this ASU to have any impact on its financial position or results of operations because it only results in additional disclosures.
In November 2025, the Financial Accounting Standards Board (FASB) published Accounting Standards Update (ASU) 2025-08, Financial Instruments Credit Losses (Topic 326): Purchased Loans (ASU 2025-08). The update was published with the intent to eliminate the current expected credit loss (CECL) “double count” on non-Purchase Credit Deteriorated (PCD) Loans. The update accomplishes this through using “gross up” methodology that is similar to the methodology used on PCD Loans. In the new method all “purchased seasoned loans” are grossed up for the Allowance of Credit Losses (ACL) expected on the loans. Purchased seasoned loans are defined as either:
The Company adopted this standard as of January 1, 2026.
Basic net income per common share available to common stockholders is calculated as net income less preferred stock dividends divided by the weighted average number of common shares outstanding. Diluted net income per common share available to common stockholders is computed using the weighted average number of common shares outstanding, increased by the assumed conversion of the Company’s convertible preferred stock and the Company’s stock options and restricted stock awarded, unless anti-dilutive.
The components of basic and diluted net income per common share available to common stockholders for the three months ended March 31, 2026 and 2025 were as follows:
Basic net income per common share available to common stockholders:
Net income available to common stockholders
26,327,000
22,171,000
Weighted average common shares outstanding
24,777,247
23,858,817
Basic earnings per common share
Diluted net income per common share available to common stockholders:
Dilutive potential common shares:
Restricted stock awarded
116,555
100,411
Diluted weighted average common shares outstanding
24,893,802
23,959,228
Diluted earnings per common share
11
There were no shares not considered in computing diluted earnings per share for the three months ended March 31, 2026 and 2025.
The amortized cost, gross unrealized gains and losses and estimated fair values for available-for-sale and held-to-maturity securities by major security type at March 31, 2026 and December 31, 2025 were as follows (in thousands):
AmortizedCost
GrossUnrealizedGains
GrossUnrealized(Losses)
Fair Value
Available-for-sale:
U.S. Treasury securities and obligations of U.S. government corporations and agencies
153,813
(10,234
143,579
Obligations of states and political subdivisions
327,480
234
(52,478
275,236
Mortgage-backed securities (1)
819,041
1,258
(86,948
733,351
Corporate bonded debt
24,703
(798
23,905
Total available-for-sale
1,325,037
1,492
(150,458
Held-to-maturity:
Other securities
153,859
(9,782
144,080
327,950
341
(47,658
280,633
705,728
2,458
(83,520
624,666
28,276
(772
27,504
1,215,813
2,802
(141,732
(1) Mortgage-backed securities include mortgage-backed securities (MBS) and collateralized mortgage obligation (CMO) issues from the following government sponsored enterprises: FHLMC, FNMA, GNMA and FHLB.
The Company also had $4.7 million and $4.6 million of equity securities, at fair value, as of March 31, 2026 and December 31, 2025, respectively. All the Company's held-to-maturity securities are government agency-backed securities for which the risk of loss is minimal. As such, as of March 31, 2026, the Company did not record an allowance for credit losses on its held-to-maturity securities.
Proceeds from sales of available-for-sale investment securities, realized gains and losses and income tax expense were as follows during the three months ended March 31, 2026 and 2025 (in thousands):
Proceeds from sales
Gross gains
Gross losses
12
The following table presents the aging of gross unrealized losses and fair value by investment category as of March 31, 2026 and December 31, 2025 (in thousands):
Less than 12 months
12 months or more
FairValue
UnrealizedLosses
797
142,331
143,128
32,023
(431
225,095
(52,047
257,118
170,102
(3,042
465,341
(83,906
635,443
3,975
(24
17,180
(774
21,155
206,897
(3,497
849,947
(146,961
1,056,844
142,833
5,923
(8
246,076
(47,650
251,999
11,327
(102
480,583
(83,418
491,910
3,967
(33
19,203
(739
23,170
21,217
(143
888,695
(141,589
909,912
At March 31, 2026, there were four hundred sixty-three available-for-sale securities with a fair value of $849.9 million and unrealized losses of $147.0 million in a continuous unrealized loss position for twelve months or more. At December 31, 2025, there were four hundred eighty-eight available-for-sale securities with a fair value of $888.7 million and unrealized losses of $141.6 million in a continuous unrealized loss position for twelve months or more.
At March 31, 2026 and December 31, 2025, there were no held-to-maturity securities in a continuous unrealized loss position for twelve months or more.
The Company does not consider available-for-sale securities with unrealized losses at March 31, 2026, to be experiencing credit losses and recognized no resulting allowance for credit losses. The Company does not intend to sell a significant amount of the investments unless they are acquired and subsequently marked to fair value, and it is more likely than not that the Company will not be required to sell these investments before recovery of the amortized cost basis, which may be the maturity dates of the securities. The unrealized losses occurred as a result of changes in interest rates, market spreads, and market conditions after purchase.
13
Loans are stated at the principal amount outstanding net of unearned discounts, unearned income, and allowance for credit losses. Unearned income includes deferred loan origination fees reduced by loan origination costs and is amortized to interest income over the life of the related loan using methods that approximated the effective interest rate method. Interest on substantially all loans is credited to income based on the principal amount outstanding.
A summary of loans at March 31, 2026 and December 31, 2025 follows (in thousands):
Construction and land development
319,945
361,678
Agricultural real estate
405,226
374,143
1-4 family residential properties
746,704
494,258
Multifamily residential properties
457,705
340,324
Commercial real estate
2,972,812
2,582,404
Loans secured by real estate
4,902,392
4,152,807
Agricultural loans
370,124
307,290
Commercial and industrial loans
1,502,384
1,385,421
Consumer loans
39,672
32,109
All other loans
179,008
161,604
Total gross loans
6,993,580
6,039,231
Less: loans held for sale
Total gross loans held for investment
6,988,671
6,034,028
Less:
Net deferred loan fees, premiums, and discounts
49,304
27,857
Allowance for credit losses
86,814
74,875
Net loans increased $921.3 million as of March 31, 2026 compared to December 31, 2025. Loans expected to be sold are classified as held for sale in the consolidated financial statements and are recorded at the lower of aggregate cost or fair value, taking into consideration future commitments to sell the loans. These loans are primarily for 1-4 family residential properties. Accrued interest on loans, which is excluded from the amortized cost of the balances above, totaled $40.1 million and $35.1 million at March 31, 2026 and December 31, 2025, respectively.
The structure of the Company’s loan approval process is based on progressively larger lending authorities granted to individual loan officers, loan committees, and ultimately the board of directors. Outstanding balances to one borrower or affiliated borrowers are limited by federal regulation; however, limits well below the regulatory thresholds are generally observed. The vast majority of the Company’s loans are to businesses located in the geographic market areas served by the Company’s branch network. Additionally, a significant portion of the collateral securing the loans in the portfolio is located within the Company’s primary geographic footprint. In general, the Company adheres to loan underwriting standards consistent with industry guidelines for all loan segments.
The Company’s lending can be summarized into the following primary areas:
Commercial Real Estate Loans. Commercial real estate loans are generally comprised of loans to small business entities to purchase or expand structures in which the business operations are housed, loans to owners of real estate who lease space to non-related commercial entities, loans for construction and land development, loans to hotel and motel operators, and loans to owners of multifamily residential structures, such as apartment buildings. Commercial real estate loans are underwritten based on historical and projected cash flows of the borrower and secondarily on the underlying real estate pledged as collateral on the debt. For the various types of commercial real estate loans, minimum criteria have been established within the Company’s loan policy regarding debt service coverage while maximum limits on loan-to-value and amortization periods have been defined. Maximum loan-to-value ratios range from 65% to 85% depending upon the type of real estate collateral, while the desired minimum debt coverage ratio is 1.20x to 1.35x. Amortization periods for commercial real estate loans are generally limited to twenty to thirty years, depending on the collateral type and loan-to-value. The Company’s commercial real estate portfolio is below the threshold of 300 percent of the Company's total capital that would designate a concentration in commercial real estate lending, as established by the federal banking regulators.
The following table represents the gross commercial real estate loans by property type as of March 31, 2026 (in thousands):
First Mid Bank
Owner occupied
744,435
747,512
Non-owner occupied
Shopping centers and malls
270,895
264,961
Industrial and warehouse
247,069
237,522
Hotels and motels
216,141
218,073
Skilled nursing facility
192,441
187,875
Assisted living facility
168,834
170,733
Office
162,049
160,524
Retail
112,492
112,169
RV parks and campgrounds
99,159
104,267
Other property types
388,656
378,768
First Mid Bank total commercial real estate
2,602,171
Two Rivers Bank
97,705
272,936
Two Rivers Bank total commercial real estate
370,641
Total commercial real estate
Commercial and Industrial Loans. Commercial and industrial loans are primarily comprised of working capital loans used to purchase inventory and fund accounts receivable that are secured by business assets other than real estate. These loans are generally written for one year or less. Also, equipment financing is provided to businesses with these loans generally limited to 80% of the value of the collateral and amortization periods limited to seven years. Commercial loans are often accompanied by a personal guaranty of the principal owners of a business. Like commercial real estate loans, the underlying cash flow of the business is the primary consideration in the underwriting process. The financial condition of commercial borrowers is monitored at least annually with the type of financial information required to be determined by the size of the relationship. Measures employed by the Company for businesses with higher risk profiles include the use of government-assisted lending programs through the Small Business Administration and U.S. Department of Agriculture.
Agricultural and Agricultural Real Estate Loans. Agricultural loans are generally comprised of seasonal operating lines to grain farmers to plant and harvest corn and soybeans, term loans to fund the purchase of equipment, and the Company's Direct Merchant Finance product to fund crop inputs, primarily seed. Agricultural real estate loans are primarily comprised of loans for the purchase of farmland. Specific underwriting standards have been established for agricultural-related loans including the establishment of projections for each operating year based on industry developed estimates of farm input costs and expected commodity yields and prices. Operating lines are typically written for one year and secured by the crop. The Direct Merchant Finance loans are typically written for one year and are generally unsecured. Loan-to-value ratios on loans secured by farmland generally do not exceed 80% and have amortization periods ranging from twenty-five to thirty years depending on the loan-to-value. Federal government-assistance lending programs through the Farm Service Agency are used to mitigate the level of credit risk when deemed appropriate.
Residential Real Estate Loans. Residential real estate loans generally include loans for the purchase or refinance of residential real estate properties consisting of one-to-four units and home equity loans and lines of credit. The Company sells most of its long-term fixed rate residential real estate loans to secondary market investors. The Company also releases the servicing of these loans upon sale. Residential real estate loans are typically underwritten to conform to industry standards including criteria for maximum debt-to-income and loan-to-value ratios as well as minimum credit scores. Loans secured by first liens on residential real estate held in the portfolio typically do not exceed 80% of the value of the collateral and have amortization periods of twenty-five years or less. The Company does not originate subprime mortgage loans.
Consumer Loans. Consumer loans are primarily comprised of loans to individuals for personal and household purposes such as the purchase of an automobile or other living expenses. Minimum underwriting criteria have been established that consider credit score, debt-to-income ratio, employment history, and collateral coverage. Typically, consumer loans are set up on monthly payments with amortization periods based on the type and age of the collateral.
Construction and land development loans. Construction and land development loans are generally comprised of loans of all sizes, across many different industries, and can include properties for commercial businesses or land development or for residential use such as multifamily properties. Commercial and land development loans are underwritten based on historical and projected cash flows of the borrower and secondarily on the underlying real estate pledged as collateral on the debt. Construction and land development loans include unique risks that require enhanced diligence by lending personnel. For these loans, documentation requirements have been established within policy, and a specific checklist is followed. Additionally, based on the type of construction loan, the policy is also followed to designate the construction and land development loans as high-volatility commercial real estate if the loan meets the criteria. To ensure consistent construction loan monitoring, loans greater than $2 million must be monitored by the Bank’s construction monitoring staff.
The policy also establishes maximum loan-to-value/amortizations, terms, construction periods, cash investments, pre-sale/lease, and other requirements and are specific to the type of property including non-farm, non-residential secured loans as well as multifamily, 1-4 family non-owner occupied, land acquisition/development/vacant lot acquisition, and raw land. Maximum loan-to-value ratios range from 65% to 80% depending upon the type of real estate collateral. Amortization periods for construction and land development loans are generally limited to twenty to thirty years, depending on the collateral type and loan-to-value. The Company’s construction and land development portfolio is below the threshold of 100 percent of the Company's total capital that would designate a concentration in construction and land development lending, as established by the federal banking regulators.
Other Loans. Other loans consist primarily of loans to municipalities to support community projects such as infrastructure improvements or equipment purchases. Underwriting guidelines for these loans are consistent with those established for commercial loans with the additional repayment source of the taxing authority of the municipality.
The allowance for credit losses represents the Company’s best estimate of the reserve necessary to adequately account for probable losses expected over the remaining contractual life of the assets. The provision for credit losses is the charge against current earnings that is determined by the Company as the amount needed to maintain an adequate allowance for credit losses. In determining the adequacy of the allowance for credit losses, and therefore the provision to be charged to current earnings, the Company relies predominantly on a disciplined credit review and approval process that extends to the full range of the Company’s credit exposure. The review process is directed by the overall lending policy and is intended to identify, at the earliest possible stage, borrowers who might be facing financial difficulty. Factors considered by the Company in evaluating the overall adequacy of the allowance include historical net credit losses, the level and composition of nonaccrual, past due and modified loans, trends in volumes and terms of loans, effects of changes in risk selection and underwriting standards or lending practices, lending staff changes, concentrations of credit, industry conditions and the current economic conditions in the region where the Company operates. The Company estimates the appropriate level of allowance for credit losses by evaluating large substandard, and large impaired loans separately from other loans.
The Company individually evaluates certain loans for impairment. Loans are individually evaluated for expected credit losses when their principal balance exceeds $250,000, and they are in nonaccrual status, their risk rating assigned is Substandard and their principal balances exceeds $5 million, or they are designated as having a modification or probable of being foreclosed. For loans that allowance for credit loss is individually measured each quarter one of three alternatives is used: (1) the present value of expected future cash flows discounted at the loan’s effective interest rate; (2) the loan’s observable market price, if available; or (3) the fair value of the collateral less costs to sell for collateral dependent loans and loans for which foreclosure is deemed to be probable. A specific allowance is assigned when expected cash flows or collateral are less than the carrying amount of the loan. The carrying value of the loan reflects reductions from prior charge-offs.
Non-individually evaluated loans comprise the vast majority of the Company’s total loan portfolio and include all loans not mentioned above in the individually evaluated loans section. A small portion of these loans are considered “criticized” due to the risk rating assigned reflecting elevated credit risk due to characteristics, such as a strained cash flow position, associated with the individual borrowers. Criticized loans are those assigned risk ratings of Special Mention, Substandard, or Doubtful.
The Company first bifurcates the loan portfolio into segments that share risk characteristics and then utilizes a discounted cash flow (DCF) method to measure the ACL on loans collectively evaluated that are sub-segmented by credit risk levels. The DCF method incorporates assumptions for probability of default, loss given default, prepayments, and curtailments over the contractual term of the loans. In determining the probability of default, the Company utilized regression analysis that includes the use of peer data to determine certain economic factors that are relevant loss drivers in the portfolio segments based on historical evaluations. National
16
unemployment is a loss driver used in all portfolios.
Within each pool, factors are evaluated that have specific impacts to the borrowers within the pool. These, along with the general risks and events, and the specific lending policies and procedures by loan type described above, are analyzed to estimate the qualitative factors used to adjust the historical loss rates.
During the current period, the following assumptions and factors were considered when determining the historical loss rate and any potential adjustments by loan pool.
Construction and Land Development Loans. Historical losses in this segment remain very low. While inflationary pressures have caused some risk in this segment, most projects are associated with financially strong borrowers. The qualitative factors for this segment increased for the period due to past due levels increasing primarily from the addition of the Two Rivers Bank loan portfolio.
Agricultural Real Estate Loans. Historical losses in the segment remain very low. Farmland values have increased over an extended period of time. While values have declined slightly from their peak, values have held up well overall. This continues to drive low loan to values in this segment. The qualitative factors for this segment were unchanged during the quarter.
Residential Real Estate Non-Owner Occupied Loans. The loan segment increased in the quarter from the addition of the Two Rivers Bank loan portfolio. The qualitative factors for this segment increased during the quarter due to this addition, including products not historically offered by First Mid Bank and variations in credit administration of the loans acquired.
Residential Real Estate Owner Occupied Loans. The loan segment increased in the quarter from the addition of the Two Rivers Bank loan portfolio. The qualitative factors for this segment increased during the quarter due to this addition, including products not historically offered by First Mid Bank and variations in the credit administration of the loans acquired. The qualitative factors for this loan segment also increased due to an increase in past dues.
HELOC Loans. These loans are a small segment to overall loan balances. There was no change to the qualitative factors for this segment during the year.
Commercial Real Estate Owner Occupied Loans. This segment has remained stable, reflecting less uncertainty to recessionary risks that were high in prior years with the rapid movement in interest rates and inflationary pressures. The quarter ended with lower past dues in this loan segment, which reduced the qualitative factors.
Commercial Real Estate Non-Owner Occupied Loans. This segment includes the Company's largest balances. The portfolio showed overall stability during the quarter and no changes to qualitative factors were made for this segment.
Agricultural Loans. Losses in this segment include the Company's Direct Merchant Financing product, which inherently comes with higher overall risk of losses. Overall past dues in this segment increased during the quarter and drove a higher qualitative factor adjustment.
Commercial and Industrial Loans. Most of the repricing to higher rates in this loan segment has already occurred. There were no changes to qualitative factors during the quarter.
Consumer Loans. This segment is a small portion of the Company's loan portfolio. Historical net charge-offs have been immaterial in this segment. No changes to qualitative factors were made during the quarter.
17
The following table presents the balance in the allowance for credit losses and the recorded investment in loans based on portfolio segment and impairment method as of the three months ended March 31, 2026 (in thousands):
Constructionand LandDevelopment
AgriculturalReal Estate
1-4 Family Residential Properties
CommercialReal Estate
AgriculturalLoans
Commercialand Industrial
ConsumerLoans
Three months ended March 31, 2026
Beginning balance
5,129
1,283
3,753
35,589
1,401
26,285
1,435
Initial allowance on loans acquired
986
184
2,140
5,360
1,904
191
10,841
Provision (release) for credit loss expense
(1,175
(12
(117
1,780
1,176
615
331
Loans charged off
(40
(26
(1,111
(291
(498
(1,966
Recoveries collected
193
40
466
Ending balance
4,940
1,415
5,943
41,619
2,663
28,553
1,681
The following table presents the balance in the allowance for credit losses and the recorded investment in loans based on portfolio segment and impairment method as of the three months ended March 31, 2025 (in thousands):
CommercialandIndustrial
Three months ended March 31, 2025
3,275
1,361
3,579
32,669
1,957
25,602
1,739
70,182
456
(69
(14
(125
809
559
(39
(338
(1,117
(223
(366
(2,083
18
90
300
3,731
1,292
3,544
32,214
1,649
26,028
1,593
70,051
Consistent with regulatory guidance, charge-offs on all loan segments are taken when specific loans, or portions thereof, are considered uncollectible. The Company’s policy is to promptly charge these loans off in the period where the uncollectible loss is reasonably determined. For all loan portfolio segments except 1-4 family residential properties and consumer, the Company promptly charges-off loans, or portions thereof, when available information confirms that specific loans are uncollectible based on information that includes, but is not limited to, (1) the deteriorating financial condition of the borrower, (2) declining collateral values, and/or (3) legal action, including bankruptcy, that impairs the borrower’s ability to adequately meet its obligations. For impaired loans that are considered solely collateral dependent, a partial charge-off is recorded when a loss has been confirmed by an updated appraisal or other appropriate valuation of the collateral.
The Company charges off 1-4 family residential and consumer loans, or portions thereof, when the Company reasonably determines the amount of the loss. The Company adheres to time frames established by applicable regulatory guidance which provides for the charge-down of 1-4 family first and junior lien mortgages to the net realizable value less costs to sell when the loan is 180 days past due, charge-off of unsecured open-end loans when the loan is 180 days past due, and charge down to the net realizable value when other secured loans are 120 days past due. Loans at these respective delinquency thresholds for which the Company can clearly document that the loan is both well-secured and in the process of collection, such that collection will occur regardless of delinquency status, need not be charged off.
The following table presents the amortized cost basis of collateral-dependent loans by class of loans that were individually evaluated to determine expected credit losses, and the related allowance for credit losses, as of March 31, 2026 and December 31, 2025 (in thousands):
Collateral
Allowance for CreditLosses
Real Estate
BusinessAssets
8,465
620
506
262
358
27,839
163
37,430
799
628
7,996
29
8,025
Other loans
10,854
165
Total loans
18,850
657
56,937
1,594
Twelve months ended December 31, 2025
111
600
371
30,208
31,290
7,123
7,152
392
11,184
84
18,307
49,626
489
The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, collateral support, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on a continuous basis. The Company uses the following definitions for risk ratings, which are commensurate with a loan considered “criticized”:
Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.
Substandard. Loans classified as substandard are inadequately protected by the current sound-worthiness and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.
Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing factors, conditions, and values, highly questionable and improbable.
19
Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered pass rated loans. The following tables present the credit risk profile of the Company’s loan portfolio based on rating category and payment activity as of March 31, 2026 (in thousands):
Term Loans by Origination Year
Revolving
Risk rating
2024
2023
2022
Prior
Construction and land development loans
Pass
114,672
115,440
5,549
11,944
32,841
27,000
307,446
Special mention
457
342
Substandard
4,968
464
3,041
8,478
10,974
11,949
33,647
30,041
316,723
Current period gross write-offs
Agricultural real estate loans
41,672
28,126
14,734
96,710
142,215
682
324,139
918
2,361
893
32,019
21,924
4,775
62,890
1,033
757
11,301
663
13,754
43,623
30,487
15,627
129,486
175,440
6,120
400,783
77,345
46,338
49,723
110,835
318,391
15,728
102,440
720,800
179
681
860
125
574
834
7,976
1,357
946
12,393
77,470
46,919
50,297
111,848
327,048
17,085
103,386
734,053
26
Commercial real estate loans
489,277
251,123
309,047
655,550
1,533,869
96,953
3,335,819
418
1,227
12,817
5,204
5,213
24,879
8,668
13,597
5,519
11,683
4,044
43,511
260,209
323,871
673,886
1,550,756
106,210
3,404,209
753
1,111
185,712
37,265
11,289
16,573
21,424
66,582
338,845
16,584
8,519
236
676
155
54
26,224
1,732
1,403
770
453
1,210
5,862
204,028
46,078
12,928
18,019
22,032
67,846
370,931
441,881
217,030
96,263
209,636
532,065
92,451
1,589,326
18,941
9,905
2,975
9,211
22,675
271
63,978
1,418
2,132
1,312
18,839
975
24,676
460,822
228,353
101,370
220,159
573,579
93,697
1,677,980
290
291
9,634
4,539
3,847
11,842
6,623
2,641
39,126
25
197
449
Doubtful
9,636
4,566
3,869
12,057
6,819
2,650
39,597
444
498
1,360,193
699,861
490,452
1,113,090
2,587,428
302,037
6,655,501
36,443
21,203
5,788
54,920
50,981
10,313
179,648
2,890
10,986
22,696
9,394
50,912
11,299
109,123
1,399,528
732,052
518,936
1,177,404
2,689,321
323,649
6,944,276
1,049
414
495
1,966
The following tables present the credit risk profile of the Company’s loan portfolio based on rating category and payment activity as of December 31, 2025 (in thousands):
2021
114,696
99,757
119,602
5,167
6,048
14,659
359,929
398
348
746
120,000
5,172
15,014
360,687
107
42,758
22,040
12,609
107,950
61,357
87,939
334,653
228
339
806
22,343
1,331
7,810
32,857
598
224
4,490
5,898
43,584
22,573
13,415
130,517
63,080
100,239
373,408
54,180
31,041
28,668
62,974
64,512
144,475
92,629
478,479
185
93
760
1,038
127
529
584
624
670
6,946
857
10,337
54,307
31,570
29,252
63,783
65,275
152,181
93,486
489,854
135
156
459,831
217,098
157,923
597,491
498,456
916,195
2,846,994
1,150
12,931
248
4,760
19,460
5,000
15,295
6,246
2,394
8,763
37,698
222,469
174,368
616,668
501,098
929,718
2,904,152
699
391
1,197
230,666
45,361
7,684
10,151
6,363
2,560
302,785
1,209
23
1,319
451
367
2,484
845
24
4,171
232,326
45,804
10,179
10,996
6,410
308,275
280
1,081
836
306
2,503
431,942
214,908
82,977
210,658
159,029
357,077
1,456,591
19,409
8,898
2,542
7,965
61
26,193
65,068
1,397
2,180
1,008
219
16,617
21,421
451,351
225,203
87,699
219,631
159,309
399,887
1,543,080
225
497
1,600
2,485
5,619
2,555
2,812
12,861
5,511
2,119
31,477
30
171
132
77
419
2,585
2,821
13,054
5,643
2,196
31,918
27
99
43
1,228
1,425
1,339,692
632,760
412,275
1,007,252
801,276
1,525,024
5,810,908
20,846
9,684
4,907
43,446
1,756
39,871
120,510
7,517
20,552
9,123
3,831
36,900
79,956
1,361,714
649,961
437,734
1,059,821
806,863
1,601,795
6,011,374
1,014
1,387
1,551
846
3,070
7,873
The following table presents the Company’s loan portfolio, on an amortized cost basis, aging analysis at March 31, 2026 and December 31, 2025 (in thousands):
30-59 Days Past Due
60-89 Days Past Due
90 Days or MorePast Due
Total Past Due
Current
Total LoansReceivable
Total Loans> 90 Days andAccruing
3,266
3,439
6,705
310,018
162
841
1,003
399,780
5,676
943
1,577
8,196
725,857
145
252
455,933
456,185
4,980
450
3,458
8,888
2,939,136
2,948,024
10,925
4,659
9,460
25,044
4,830,724
4,855,768
695
2,520
3,232
367,699
1,238
561
1,814
3,613
1,495,466
1,499,079
285
72
85
442
39,155
178,901
13,143
5,309
13,879
32,331
6,911,945
Percent of total loans
0.47
%
372,567
4,725
1,630
8,042
481,812
339,482
712
5,671
6,611
2,558,059
2,564,670
5,437
1,858
8,199
15,494
4,112,607
4,128,101
308,256
205
904
1,523
1,380,075
1,381,598
329
44
484
31,434
161,482
6,180
2,126
9,214
17,520
5,993,854
0.29
Within all loan portfolio segments, loans are considered impaired when, based on current information and events, it is probable the Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. The entire balance of a loan is considered delinquent if the minimum payment contractually required to be made is not received by the specified due date. Impaired loans, excluding certain modified loans, are placed on nonaccrual status. Impaired loans include nonaccrual loans and loans modified in restructuring where concessions have been granted to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection. It is the Company’s policy to have any restructured loans which are on nonaccrual status prior to being modified remain on nonaccrual status until, in the opinion of management, the financial position of the borrower indicates there is no longer any reasonable doubt as to the timely collection of interest or principal. If the restructured loan is on accrual status prior to being modified, the loan is reviewed to determine if the modified loan should remain on accrual status.
The Company’s policy is to discontinue the accrual of interest income on all loans for which principal or interest is ninety days past due. The accrual of interest is discontinued earlier when, in the opinion of management, there is reasonable doubt as to the timely collection of interest or principal. Once interest accruals are discontinued, accrued but uncollected interest is charged against current year's income. Subsequent receipts on nonaccrual loans are recorded as a reduction of principal, and interest income is recorded only after principal recovery is reasonably assured. Interest on loans determined to be modified is recognized on an accrual basis in accordance with the restructured terms if the loan is in compliance with the modified terms. Nonaccrual loans are returned to accrual status when, in the opinion of management, the financial position of the borrower indicates there is no longer any reasonable doubt as to the timely collection of interest or principal. The Company requires a period of satisfactory performance of not less than six months before returning a nonaccrual loan to accrual status.
The amount of interest income recognized by the Company within the periods stated above was due to loans modified in restructuring that remain on accrual status.
The following table presents the Company’s recorded balance of nonaccrual loans as of March 31, 2026 and December 31, 2025 (in thousands). This table excludes performing purchased credit deteriorated loans and performing loans modified.
Nonaccrualwith noAllowance for
Credit Loss
Nonaccrual
3,796
8,470
1,562
1,181
6,158
7,680
5,763
503
8,033
8,347
10,109
10,381
20,052
26,562
16,606
17,701
1,909
2,537
3,028
3,057
1,232
1,967
182
1,823
1,942
26,993
43,191
19,981
31,053
The aggregate principal balances of nonaccrual, past due ninety days or more loans were $43.2 million and $31.1 million at March 31, 2026 and December 31, 2025, respectively. Interest income that would have been recorded under the original terms of such nonaccrual loans totaled $501,000 and $471,000 for the three months ended March 31, 2026 and 2025, respectively.
The following table shows the amortized cost of loans at March 31, 2026 and 2025 that were both experiencing financial difficulty and modified segregated by portfolio segment and type of modification. The percentage of the amortized cost of loans that were modified to borrowers in financial distress as compared to outstanding loans is also presented below.
Payment
Term
Class of
Delay
Extension
Rate
Financing
Investment
Modifications
Reduction
Receivable
283
32
1,061
0.02
1,262
505
0.03
0.05
211
0.01
1,995
1,275
0.06
42
748
822
158
979
1,168
906
859
87
2,029
1,000
0.07
The Company closely monitors the performance of loans that have been modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table shows the performance of such loans that have been modified in the last twelve months ended March 31, 2026 and 2025.
30-59 DaysPast Due
60-89 DaysPast Due
Total PastDue
174
The following table shows the financial effect of loan modifications during the quarter ended March 31, 2026 and 2025 to borrowers experiencing financial difficulty.
Weighted Average
Interest Rate
Term Extension
(in months)
1.00
A loan is considered to be in payment default once it is 90 days past due under the modified terms. There were one and four loans modified during the prior twelve months that experienced payment defaults for the three months ended March 31, 2026 and 2025, respectively.
At March 31, 2026 and December 31, 2025, the balance of real estate owned included $5.5 million and $2.9 million respectively of foreclosed real estate properties recorded as a result of obtaining physical possession of the property. At March 31, 2026 and December 31, 2025, the recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceeds were in process were $6.0 million and $1.3 million, respectively.
The Company has goodwill from business combinations, identifiable intangible assets assigned to core deposit relationships and customer lists of business lines acquired. The following table presents gross carrying amount and accumulated amortization by major intangible asset class as of March 31, 2026 and December 31, 2025 (in thousands):
Gross CarryingValue
AccumulatedAmortization
Goodwill
207,151
3,760
Core deposit intangibles
101,185
55,547
79,945
53,285
Customer list intangibles
40,814
16,805
34,420
16,021
349,150
76,112
321,516
73,066
Core deposit intangibles are being amortized over a period of 10 years and other intangibles, primarily customer lists, are being amortized over periods ranging from 3 to 12 years.
During the quarter ended March 31, 2026, a customer list intangible asset of $1.4 million was recorded for the acquisition of DIA’s customer list in connection with its insurance business. The purchase consideration given to DIA matches the amount of intangible assets recorded.
No goodwill was recorded for the acquisition and merger of Two Rivers during the first quarter of 2026. The following table provides a reconciliation of the purchase price paid for the acquisition of Two Rivers and the lack of goodwill recorded (in thousands):
Unallocated purchase price
(14,671
Purchase accounting adjustments:
Decrease in fair value of securities
6,074
Decrease in fair value of loans, net
17,145
Decrease in fair value of premises and equipment
1,552
Decrease on time deposits
Decrease in fair value of junior subordinated debt and other borrowings
(253
Increase in core deposit intangible
(17,056
Customer list intangible
(5,043
Recapture of existing goodwill
20,657
(8,274
Total purchase accounting adjustments
14,671
Resulting goodwill from acquisition
In December 2025, a customer list intangible asset of $764,000 was recorded for the acquisition of RFMS customer list in connection with its farm management business. The purchase consideration given to RFMS matches the amount of intangible assets recorded.
During the quarter ended September 30, 2025, a customer list intangible asset of $2.8 million was recorded for the acquisition of a portion of AAIG's customer list in connection with its insurance business. The purchase consideration given to AAIG matches the amount of intangible assets recorded.
During the quarter ended September 30, 2024, goodwill of $6.9 million was recorded for the acquisition of the stock of Mid Rivers Insurance Group, Inc., in connection with its insurance business.
The following provides a reconciliation of the purchase price paid for Mid Rivers Insurance Group, Inc. and the amount of goodwill recorded (in thousands):
10,059
Less purchase accounting adjustments:
Insurance Company intangible
4,305
(1,176
3,129
6,930
The unpaid principal balance of mortgage loans serviced for others was $495.7 million, $557.6 million, and $509.7 million as of March 31, 2026, March 31, 2025, and December 31, 2025, respectively. The Company has mortgage servicing rights acquired in previous acquisitions. Mortgage servicing rights are accounted for under the amortization method. The following table summarizes the activity pertaining to the mortgage servicing rights included in intangible assets as of three months ended March 31, 2026 and 2025 (in thousands):
5,629
Adjustment to valuation reserve
Mortgage servicing rights amortized
(255
(287
Interest only strip
(2
4,309
5,338
Fair value of portfolio
5,430
6,500
Total amortization expense for three months ended March 31, 2026 and 2025 was as follows (in thousands):
2,262
2,263
784
Mortgage servicing rights
255
287
Estimated amortization expense for each of the five succeeding years is shown in the table below (in thousands):
Aggregate amortization expense:
For period 01/01/26-03/31/26
Estimated amortization expense:
For period 04/01/26-12/31/26
11,509
For year-ended 12/31/27
13,911
For year-ended 12/31/28
12,276
For year-ended 12/31/29
10,502
For year-ended 12/31/30
8,117
The weighted average amortization period for core deposit, customer lists and total intangibles was 3.40, 4.77, and 3.87 years respectively, at March 31, 2026.
In accordance with GAAP, the Company performed its annual testing of goodwill for impairment as of September 30, 2025 and determined that, as of that date, goodwill was not impaired. The goodwill of a reporting unit is tested for impairment between annual tests if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying amount. Management also concluded that the remaining amounts and amortization periods were appropriate for all intangible assets.
Securities sold under agreements to repurchase have overnight maturities and a weighted average rate of 2.04%.
The right of setoff for a repurchase agreement resembles a secured borrowing, whereby the collateral pledged by the Company would be used to settle the fair value of the repurchase agreement should the Company be in default (e.g., declare bankruptcy), the Company could cancel the repurchase agreement (i.e., cease payment of principal and interest), and attempt collection on the amount of collateral value in excess of the repurchase agreement fair value. The collateral is held by a third-party financial institution in the counterparty's custodial account. The counterparty has the right to sell or repledge the investment securities. For government entity repurchase agreements, the collateral is held by the Company in a segregated custodial account under a tri- party agreement. The Company is required by the counterparty to maintain adequate collateral levels. In the event the collateral fair value falls below stipulated levels, the Company will pledge additional securities. The Company closely monitors collateral levels to ensure adequate levels are maintained, while mitigating the potential of over-collateralization in the event of counterparty default.
Repurchase agreements by class of collateral pledged are as follows (in thousands):
US Treasury securities and obligations of U.S. government corporations and agencies
60,723
55,863
148,088
140,853
FHLB advances represent borrowings by First Mid Bank and Two Rivers Bank to fund loan demand. Advances were $275.2 million and $270.0 million at March 31, 2026 and December 31, 2025, respectively. At March 31, 2026, the advances were as follows:
Advance
Term (in years)
Maturity Date
19,397
7.0
2.46%
May 29, 2026
22,149
10.0
1.74%
June 5, 2026
25,000,000
3.0
4.40%
June 15, 2026
14,546
15.0
3.87%
July 1, 2026
14,365
3.68%
July 20, 2026
2,400,000
4.79%
September 8, 2026
19,538
2.26%
September 9, 2026
57,319
2.11%
September 11, 2026
66,169
1.80%
October 9, 2026
94,344
1.81%
January 29, 2027
102,811
1.52%
March 1, 2027
4.37%
May 10, 2027
4.32%
May 17, 2027
22,083
2.38%
August 6, 2027
11,070
2.42%
August 9, 2027
204,236
2.72%
January 26, 2028
5.0
3.95%
June 29, 2028
261,208
2.10%
June 20, 2029
3.93%
June 27, 2029
182,238
2.01%
August 2, 2029
5,000,000
1.15%
October 3, 2029
1.12%
10,000,000
1.39%
December 31, 2029
3.46%
February 7, 2030
412,756
1.06%
March 6, 2030
415,533
1.29%
March 15, 2030
3.16%
August 14, 2030
358,310
0.89%
November 4, 2030
50,000,000
2.92%
November 25, 2030
502,036
0.83%
February 14, 2031
2.71%
March 5, 2035
275,180,108
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs. There is a hierarchy of three levels of inputs that may be used to measure fair value:
Level 1Valuations for assets and liabilities traded in active exchange markets, such as the New York Stock Exchange. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.
Level 2Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third party pricing services for identical or comparable assets or liabilities which use observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in active markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Following is a description of the inputs and valuation methodologies used for assets measured at fair value on a recurring basis and recognized in the accompanying balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy.
Available-for-Sale Securities. The fair value of available-for-sale securities is determined by various valuation methodologies. Where quoted market prices are available in an active market, securities are classified within Level 1. If quoted market prices are not available, then fair values are estimated by using quoted prices of securities with similar characteristics or independent asset pricing services and pricing models, the inputs of which are market-based or independently sources market parameters, including but not limited to, yield curves, interest rates, volatilities, prepayments, defaults, cumulative loss projections and cash flows. Such securities are classified in Level 2 of the valuation hierarchy. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.
Equity Securities. The fair value of current equity securities is determined by obtaining quoted market prices in an active market and are classified within Level 1. In cases where quoted market prices are not available, fair values are estimated by using quoted prices of securities with similar characteristics and are classified in Level 2 of the valuation hierarchy.
Derivatives. The fair value of derivatives is based on models using observable market data as of the measurement date and are therefore classified in Level 2 of the valuation hierarchy.
Loans Held for Sale. The fair values are estimated by using quoted prices of loans with similar characteristics and are therefore classified in Level 2 of the valuation hierarchy.
The following table presents the Company’s assets that are measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall as of March 31, 2026 and December 31, 2025 (in thousands):
Fair Value Measurements Using:
Quoted Prices inActive Marketsfor IdenticalAssets (Level 1)
SignificantOtherObservableInputs (Level 2)
SignificantUnobservableInputs(Level 3)
Available-for-sale securities:
Mortgage-backed securities
725,876
7,475
21,146
2,759
Total available-for-sale securities
1,165,837
10,234
Equity securities
Loans held for sale
Derivative assets: interest rate swaps
1,721
1,187,418
1,172,467
Derivative liabilities: interest rate swaps
1,241
24,745
1,074,124
1,728
1,088,402
1,081,055
1,247
The change in fair value of assets measured on a recurring basis using significant unobservable inputs (Level 3) for the years ended three months ended March 31, 2026 and 2025 is summarized as follows (in thousands):
5,759
Purchases
Following is a description of the valuation methodologies used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy.
Collateral Dependent Loans.
Loans for which it is probable that the Company will not collect all principal and interest due according to contractual terms are measured for impairment. Allowable methods for determining the amount of impairment and estimating fair value include using the fair value of the collateral for collateral dependent loans.
If the impaired loan is identified as collateral dependent, then the fair value method of measuring the amount of impairment is utilized. This method requires obtaining a current independent appraisal of the collateral and applying a discount factor to the value. Impaired loans that are collateral dependent are classified within Level 3 of the fair value hierarchy when impairment is determined using the fair value method.
Management establishes a specific allowance for loans that have an estimated fair value that is below the carrying value. The total carrying amount of loans for which a change in specific allowance has occurred as of March 31, 2026 was $21.6 million and a fair value of $19.9 million resulting in specific loss exposures of $1.7 million. As of December 31, 2025, the total carrying amount of loans for which a change in specific allowance occurred was $11.0 million. These loans had a fair value of $10.4 million which resulted in specific loss exposures of $605,000.
When there is little prospect of collecting principal or interest, loans, or portions of loans, may be charged off to the allowance for credit losses. Losses are recognized in the period an obligation becomes uncollectible. The recognition of a loss does not mean that the loan has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off the loan even though partial recovery may be affected in the future.
Foreclosed Assets Held for Sale.
Other real estate owned acquired through loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. The adjustment at the time of foreclosure is recorded through the allowance for credit losses. Due to the subjective nature of establishing fair value when the asset is acquired, the actual fair value of the other real estate owned or foreclosed asset could differ from the original estimate. If it is determined that fair value declines subsequent to foreclosure, a valuation allowance is recorded through non-interest expense. Operating costs associated with the assets after acquisition are also recorded as non-interest expense. Gains and losses on the disposition of other real estate owned and foreclosed assets are netted and posted to other non-interest expenses. The total carrying amount of other real estate owned as of March 31, 2026 was $5.5 million. Other real estate owned included in the total carrying amount and measured at fair value on a nonrecurring basis during the year amounted to $317,000. The total carrying amount of other real estate owned as of December 31, 2025 was $2.9 million. Other real estate owned included in the total carrying amount and measured at fair value on a nonrecurring basis during the year amounted to $605,000.
The following table presents the fair value measurement of assets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at March 31, 2026 and December 31, 2025 (in thousands):
Quoted Pricesin Active Markets for Identical Assets
SignificantOtherObservable Inputs
SignificantUnobservableInputs
(Level 1)
(Level 2)
(Level 3)
Collateral dependent loans
19,916
Foreclosed assets held for sale
317
10,389
605
Sensitivity of Significant Unobservable Inputs
The following table presents quantitative information about unobservable inputs used in Level 3 fair value measurements other than goodwill at March 31, 2026 and December 31, 2025.
Valuation
Range
(in thousands)
Technique
Unobservable Inputs
(Weighted Average)
$19,916
Third partyvaluations
Discount to reflect realizable value
0%-40%
(20%)
Discount to reflect realizable value less estimated selling costs
(35%)
$10,389
Third party valuations
0% - 40%
The following tables present estimated fair values of the Company’s financial instruments at March 31, 2026 and December 31, 2025 (in thousands):
CarryingAmount
Level 1
Level 2
Level 3
Financial assets
Cash and due from banks
476,083
Available-for-sale investment securities
Held-to-maturity investment securities
Equity investment securities
Loans net of allowance for credit losses
6,653,493
Federal Reserve Bank stock
19,855
Federal Home Loan Bank stock
12,341
Financial liabilities
Deposits
7,476,423
5,972,507
1,503,916
294,417
60,961
32,435
254,844
5,761,258
11,351
6,322,439
5,265,780
1,056,659
270,338
60,800
On February 28, 2026, the Company completed its acquisition of Two Rivers Financial Group, Inc. (“Two Rivers”) pursuant to an Agreement and Plan of Merger Agreement, dated October 29, 2025 (the “Agreement”). Pursuant to the Agreement, Two Rivers was merged with and into the Company. Two Rivers shareholders received 1.225 shares of the Company's common stock for each share of Two Rivers common stock.
The Company accounted for the Two Rivers acquisition as a business combination using the acquisition method of accounting in accordance with ASC 805, Business Combinations (“ASC 805”). ASC 805 requires assets purchased and liabilities assumed to be recorded at their respective fair values at the date of acquisition. The Company determined the fair value of loans, core deposit
intangibles, time deposits, real property, jr. subordinated debt, a note payable, leases, FHLB borrowings and a customer list intangible with the assistance of third-party valuations and appraisals.
A preliminary summary of the fair value of assets received and liabilities assumed are as follows:
88,972
Loans, net
860,534
Investments-available for sale
169,780
FHLB stock
989
Premises and equipment
11,743
Accrued interest receivable
4,408
Prepaid expenses
954
12,889
Core deposit intangible
21,240
5,043
Deferred tax asset
10,191
Total assets acquired
Liabilities
1,040,793
FHLB advance
5,308
Note payable
20,004
9,526
Accrued interest payable
829
Accrued and other liabilities
6,165
Total liabilities assumed
Net assets acquired
Total consideration
Goodwill / bargain purchase
The following table presents a summary of consideration transferred:
(In thousands, except shares)
Common stock issued (2,539,831 shares)
Cash consideration
Purchase price
The Company recorded no goodwill or bargain purchase in connection with the acquisition of Two Rivers. The goodwill calculation is provisional for up to one year after the acquisition and could be adjusted in subsequent quarters during 2026 if additional relevant information to the fair values listed above become available. The descriptions below describe the methods used to determine the fair value of significant assets acquired and liabilities assumed, as presented above:
Loans, net. The fair value of the loan portfolio was calculated on an individual loan basis using a discounted cash flow analysis, with results presented and assumptions applied on a summary basis. This analysis took into consideration the contractual terms of the loans and assumptions related to the cost of debt, cost of equity, servicing cost, and other liquidity/risk premium considerations to estimate the projected cash flows. The inputs and assumptions used in the fair value estimate of the loan portfolio include loss rates, discount rate, prepayment speed, and foreclosure lag. Cash flows were adjusted by estimating future credit losses and the rate of prepayments. Projected monthly cash flows were then discounted to present value using a risk-adjusted market rate for similar loans.
Premises and equipment. The fair value of the real estate acquired was determined by using third party real estate appraisers. The appraisals factored in the condition of the property and comparable sales of similar properties in similar markets. The appraisals allocated the value of each property between land and building and the properties were recorded at the appraised value on the balance sheet as of the date of the acquisition.
Core deposit intangible. The Company identified customer relationships, in the form of core deposit intangibles, as an identified intangible asset. Core deposit intangibles derive value from the expected future benefits or earnings capacity attributable to the acquired core deposits. The fair value of the core deposit intangible was estimated by identifying the expected future benefits of the core deposits and discounting those benefits back to present value. The core deposit intangible will be amortized over its estimated useful life of approximately 10 years using the sum of the months digits accelerated method.
Customer list intangible. The Company identified wealth management trust customer relationships, in the form of customer list intangible, as an identified intangible asset. Customer list intangibles derive value from the expected future benefits or earnings capacity attributable to the acquired trust customer relationships. The fair value of the customer list intangible was estimated by identifying the expected future benefits of the customer relationships and discounting those benefits back to present value. The customer list intangible will be amortized over its estimated useful life of approximately 11 years using the straight-line method.
Deposits. The fair value of demand deposit and interest checking deposit accounts was assumed to approximate the carrying value as these accounts have no stated maturity and are payable on demand. The fair value of time deposits was estimated by discounting the contractual future cash flow using market rates offered for time deposits of similar remaining maturities.
FHLB borrowings, note payable, and jr. subordinated debt. The FHLB borrowings, note payable, and jr. subordinated debt was fair valued using an income approach. Cash flows were calculated using the instrument’s annualized contractual rate and discounted to present value using market rates for similar types of borrowing arrangements.
Accounting for acquired loans. Loans acquired are recorded at fair value with no carryover of the related allowance for credit losses. Purchased-credit deteriorated loans (“PCD”) are loans that have experienced more than insignificant credit deterioration since origination and are recorded at the purchase price. The allowance for credit losses is determined at the loan level. Non-PCD loans have not experienced a more than insignificant deterioration in credit quality since origination. Under ASU 2025-08, these loans are referred to as purchased seasoned loans and accounted for similarly to the PCD loans. PCD and purchased seasoned loan’s purchase price and the allowance for credit losses becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized into interest income over the life of the loan.
In accordance with ASC 326, Financial Instruments – Credit Losses, immediately following the acquisition the Company established a $10.8 million allowance for credit losses on the $896.2 million of acquired loans.
The following table provides a summary of loans purchased as part of the Two Rivers acquisition as of the acquisition date:
Unpaid principal balance
896,204
Allowance for credit losses at acquisition
(10,841
Non-credit discount on acquired loans
(24,786
Fair value of loans
860,577
The following unaudited pro forma condensed combined financial information presents the results of operations of the Company, including the effects of the purchase accounting adjustments and acquisition expenses, had the Two Rivers Merger taken place at the beginning of the period (dollars in thousands, except per share data):
77,091
68,234
1,849
Non-interest income
28,498
27,725
Non-interest expense
69,530
65,067
33,461
29,043
Income tax expense
7,718
6,103
25,743
22,940
Earnings per share
Basic
0.97
0.87
Diluted
Basic weighted average shares outstanding
26,470,468
26,398,648
Diluted weighted average shares outstanding
26,587,023
26,499,059
Acquisition costs are expensed as incurred as a component of non-interest expense and primarily include, but are not limited to, severance costs, professional services, data processing fees, and marketing and advertising expenses. The Company incurred acquisition costs related to the Two Rivers acquisition, pre-tax, of $2.1 million during the three months ended March 31, 2026 and no related acquisition costs were incurred during the three months ended March 31, 2025.
The Company recognizes a lease liability and a right-of-use asset, based on the present value of lease payments over the lease term. The discount rate used in determining the present value is the Company's incremental borrowing rate which is the FHLB fixed advance rate based on the lease commencement date. In addition, the Company has elected not to include short-term leases (i.e., leases with terms of twelve months or less) or equipment leases (primarily copiers) deemed immaterial, on the consolidated balance sheets. The following table contains supplemental balance sheet information related to leases (dollars in thousands):
Operating lease right-of-use assets
Operating lease liabilities
Weighted-average remaining lease term (in years)
4.3
4.4
Weighted-average discount rate
3.57
3.54
Certain of the Company's leases contain options to renew the lease; however, not all renewal options are included in the calculation of lease liabilities as they are not reasonably certain to be exercised. The Company's leases do not contain residual value guarantees or material variable lease payments. The Company does not have any other material restrictions or covenants imposed by leases that would impact the Company's ability to pay dividends or cause the Company to incur additional financial obligations.
Future minimum lease payments under operating leases are (in thousands):
Operating Leases
2,799
2027
3,402
2028
2,753
2029
2030
1,541
Thereafter
2,685
Total minimum lease payments
15,451
Less imputed interest
(1,497
Total lease liabilities
34
The components of lease expense for the three months ended March 31, 2026 and 2025 were as follows (in thousands):
Operating lease cost
912
826
Short-term lease cost
37
Variable lease cost
173
343
Total lease cost
1,122
1,200
Income from subleases
(77
Net lease cost
1,045
1,120
As the Company elected not to separate lease and non-lease components, the variable lease cost primarily represents variable payment such as common area maintenance and copier expense. The Company does not have any material sub-lease agreements. In October 2025, the Company recognized a $630,000 gain on the sale of their branch location in St. Louis, MO and subsequently leased the property back from the buyer with a lease term ending on December 31, 2026. Cash paid for amounts included in the measurement of lease liabilities was (in thousands):
Operating cash flows from operating leases
Note 10 -- Derivatives
The Company utilizes interest rate swaps, designated as fair value hedges, to mitigate the risk of changing interest rates on the fair value of fixed rate loans. For derivative instruments that are designed and qualify as a fair value hedge, the gain or loss on the derivative instrument, as well as the offsetting loss or gain in the hedged asset attributable to the hedged risk, is recognized in current earnings.
The following table provides the outstanding notional balances and fair value of outstanding derivatives designated as hedging instruments as of March 31, 2026 and December 31, 2025 (in thousands):
Derivative
Balance SheetLocation
Weighted AverageRemaining Maturity(Years)
NotionalAmount
EstimatedValue
Interest rate swap agreements
3.1
11,901
(1,241
3.3
11,974
(1,247
The effects of the fair value hedges on the Company's income statement during the three months ended March 31, 2026 and 2025 were as follows (in thousands):
Location of Gain (Loss) on Derivative
Interest income on loans
(1
(263
Location of Gain (Loss) on Hedged Items
263
35
The following amounts were recorded on the balance sheet related to the cumulative basis adjustment for fair value hedges as of March 31, 2026 and December 31, 2025 (in thousands):
Line Item in the Balance Sheet inWhich the Hedge Items are Included
Carrying Amount of the Hedged Assets
Cumulative Amount of Fair Value HedgingAdjustments Included in the CarryingAmount of the Hedged Assets
11,421
(480
11,493
(481
The following table provides the outstanding notional balances and fair value of outstanding derivatives not designated as hedging instruments as of the three months ended March 31, 2026 and December 31, 2025 (dollars in thousands):
2.7
24,238
27,233
481
Note 11 -- Regulatory Capital
The Company is subject to various regulatory capital requirements administered by the federal banking agencies. Bank holding companies follow minimum regulatory requirements established by the Board of Governors of the Federal Reserve System (“Federal Reserve System”), First Mid Bank follows similar minimum regulatory requirements established for national banks by the Office of the Comptroller of the Currency (“OCC”). Two Rivers Bank follows similar minimum regulatory requirements established for Iowa banks by the Iowa Division of Banking and qualifies to be a community bank and utilize the community bank leverage ratio. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary action by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements.
Quantitative measures established by regulatory capital standards to ensure capital adequacy require the Company and its subsidiary banks to maintain minimum capital amounts and ratios (set forth in the table below). Management believes that, as of March 31, 2026 and December 31, 2025, the Company and First Mid Bank and Two Rivers Bank met all capital adequacy requirements.
As of December 31, 2025, the most recent notification from the primary regulators categorized First Mid Bank and Two Rivers Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well-capitalized, minimum total risk-based capital, Tier 1 risk-based capital, Common Equity Tier 1 risk-based capital, and Tier 1 leverage ratios must be maintained as set forth in the following table. At March 31, 2026, there were no conditions or events since the most recent notification that management believes has changed this categorization.
Actual
Required Minimum for Capital AdequacyPurposes with Capital Buffer
To Be Well-Capitalized Under PromptCorrective Action Provisions
(Dollars in thousands)
Amount
Ratio
Total capital (to risk-weighted assets)
Company
1,109,373
15.48
752,330
> 10.50%
N/A
918,376
14.48
665,941
634,229
> 10.00%
116,694
13.95
87,862
83,678
Tier 1 capital (to risk-weighted assets)
972,518
13.57
609,029
> 8.50%
842,769
13.29
539,095
507,384
> 8.00%
115,518
13.81
71,126
66,942
Common equity tier 1 capital (to risk-weighted assets)
938,496
13.10
501,553
> 7.00%
443,961
412,249
> 6.50%
58,574
54,391
Tier 1 capital (to average assets)
10.62
366,286
> 4.00%
10.75
313,474
391,842
> 5.00%
9.94
46,467
58,084
989,634
15.67
663,053
>10.50%
910,047
14.47
660,282
628,840
855,405
13.55
536,757
835,826
534,514
503,072
830,951
13.16
442,035
440,188
408,746
11.07
308,994
10.88
307,361
384,201
The Company's risk-weighted assets, capital, and capital ratios for March 31, 2026 were computed in accordance with Basel III capital rules. As of March 31, 2026, the Company, First Mid Bank and Two Rivers Bank had capital ratios above the required minimums for regulatory capital adequacy, and First Mid Bank and Two Rivers Bank had capital ratios that qualified it for treatment as well-capitalized under the regulatory framework for prompt corrective action with respect to banks.
Note 12 -- Commitments and Contingent Liabilities
First Mid Bank and Two Rivers Bank enter into financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of their customers. These financial instruments include lines of credit, letters of credit and other commitments to extend credit. Each of these instruments involves, to varying degrees, elements of credit, interest rate, and liquidity risk in excess of the amounts recognized in the consolidated balance sheets. The Company uses the same credit policies and requires similar collateral in approving lines of credit and commitments and issuing letters of credit as it does in making loans. The exposure to credit losses on financial instruments is represented by the contractual amount of these instruments. However, the Company does not anticipate any material losses from these instruments and has adequately reserved for these instruments.
The off-balance sheet financial instruments whose contract amounts represent credit risk at March 31, 2026 and December 31, 2025 were as follows (in thousands):
Unused commitments and lines of credit:
226,184
214,028
Commercial operating
774,829
675,087
Home equity
128,947
119,456
357,169
371,322
1,487,129
1,379,893
Standby letters of credit
14,937
17,575
Commitments to originate credit represent approved commercial, residential real estate and home equity loans that generally are expected to be funded within ninety days. Lines of credit are agreements by which the Company agrees to provide a borrowing accommodation up to a stated amount as long as there is no violation of any condition established in the loan agreement. Both commitments to originate credit and lines of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the lines and some commitments are expected to expire without being drawn upon, the total amounts do not necessarily represent future cash requirements.
Standby letters of credit are conditional commitments issued by the Company to guarantee the financial performance of customers to third parties. Standby letters of credit are primarily issued to facilitate trade or support borrowing arrangements and generally expire in one year or less. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending credit facilities to customers. The maximum amount of credit that would be extended under letters of credit is equal to the total off-balance sheet contract amount of such instrument at March 31, 2026. The Company's deferred revenue under standby letters of credit was nominal.
The Company is also subject to claims and lawsuits that arise primarily in the ordinary course of business. It is the opinion of management that the disposition of ultimate resolution of such claims and lawsuits will not have a material adverse effect on the consolidated financial position, results of operations and cash flows of the Company.
The following discussion and analysis is intended to provide a better understanding of the consolidated financial condition and results of operations of the Company and its subsidiaries for the three months ended March 31, 2026 and 2025. This discussion and analysis should be read in conjunction with the consolidated financial statements, related notes and selected financial data appearing elsewhere in this report.
The Company maintains a website at www.firstmid.com. All periodic and current reports of the Company and amendments to these reports filed with the Securities and Exchange Commission (“SEC”) can be accessed, free of charge, through this website and at www.sec.gov as soon as reasonably practicable after these materials are filed with the SEC.
This document may contain certain forward-looking statements about the Company, such as discussions of the Company’s pricing and fee trends, credit quality and outlook, liquidity, new business results, expansion plans, anticipated expenses and planned schedules. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of the Company are identified by use of the words “believe,”
38
“expect,” “intend,” “anticipate,” “estimate,” “project,” or similar expressions. Actual results could differ materially from the results indicated by these statements because the realization of those results is subject to many risks and uncertainties, including, among other things, the possibility that any of the anticipated benefits of the proposed transactions between First Mid and Two Rivers will not be realized within the expected time period; the risk that integration of the operations of Two Rivers with First Mid will be materially delayed or will be more costly or difficult than expected; the effect of the announcement of the proposed transactions on customer relationships and operating results; the possibility that the proposed transactions may be more expensive to complete than anticipated, including as a result of unexpected factors or events; changes in interest rates; general economic conditions and those in the market areas of the Company; legislative and/or regulatory changes; monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board; the quality or composition of the Company’s loan or investment portfolios and the valuation of those investment portfolios; demand for loan products; deposit flows; competition, demand for financial services in the market areas of the Company; accounting principles, policies and guidelines; or any of the other foregoing risks. Additional information concerning the Company, including additional factors and risks that could materially affect the Company’s financial results, are included in the Company’s filings with the SEC, including its Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q. Forward-looking statements speak only as of the date they are made. Except as required under the federal securities laws or the rules and regulations of the SEC, the Company does not undertake any obligation to update or review any forward-looking information, whether as a result of new information, future events or otherwise.
This overview of management’s discussion and analysis highlights selected information in this document and may not contain all the information that is important to you. For a more complete understanding of trends, events, commitments, uncertainties, liquidity, capital resources, and critical accounting estimates you should carefully read this entire document. These have an impact on the Company’s consolidated financial condition and results of consolidated operations.
Net income was $26.3 million and $22.2 million for the three months ended March 31, 2026 and 2025, respectively and diluted net income per common share was $1.06 and $0.93 for the three months ended March 31, 2026 and 2025, respectively.
Year-ended
Return on average assets
1.26
1.19
1.20
Return on average common equity
10.45
10.35
10.24
Average common equity to average assets (non-GAAP)
12.10
11.46
11.68
Total assets were $9.3 billion at March 31, 2026, compared to $8.0 billion as of December 31, 2025. Net loan balances were $6.9 billion at March 31, 2026 compared to $5.9 billion at December 31, 2025.
Total deposit balances increased to $7.5 billion at March 31, 2026 from $6.4 billion at December 31, 2025. The increase was primarily due to the acquisition of Two Rivers Bank.
Net interest margin (tax equivalent), defined as net interest income divided by average interest-earning assets, was 3.78% for the three months ended March 31, 2026, up from 3.60% for the same period in 2025. This increase was primarily due to an increase in earning asset yields and decreased funding costs.
Net interest income before the provision for credit losses was $70.8 million compared to net interest income of $59.4 million for the same period in 2025. The increase in net interest income was primarily due to the addition of the Two Rivers Bank loan portfolio, as well as the increased net interest margin as mentioned above.
Total non-interest income of $26.4 million increased $1.6 million or 6.3% from $24.9 million for the same period last year. The increase in non-interest income resulted primarily from the addition of Two Rivers Bank, an increase in insurance commissions, and an increase in wealth management revenues.
Total non-interest expense of $60.7 million increased $6.3 million or 11.5% from $54.5 million for the same period last year. The increase was primarily due to increases in salaries, employee benefits, net occupancy, equipment expenses, and integration expenses due to the acquisition of Two Rivers in the first quarter of 2026.
39
Following is a summary of the factors that contributed to the changes in net income (in thousands):
Change inNet Income
2026 versus 2025
11,376
(946
Other income, including securities transactions
Other expenses
(6,253
(1,598
Increase in net income
4,156
Credit quality is an area of importance to the Company. Total nonperforming loans were $44.1 million at March 31, 2026, compared to $26.6 million at March 31, 2025 and $31.9 million at December 31, 2025. See the discussion under the heading “Loan Quality and Allowance for Credit Losses” for a detailed explanation of these balances. Repossessed asset balances totaled $5.5 million at March 31, 2026 compared to $2.1 million at March 31, 2025 and $2.9 million at December 31, 2025.
The Company’s provision for credit losses for the three months ended March 31, 2026 and 2025 was $2.6 million and $1.7 million, respectively. The increase in provision expense was expected as the industry returns to a normal credit cycle from historically low credit losses.
The Company’s capital position remains strong, and the Company has consistently maintained regulatory capital ratios above the “well-capitalized” standards. The Company’s Tier 1 capital to risk weighted assets ratio at March 31, 2026 and 2025 and December 31, 2025 was 13.57%, 13.13% and 13.55%, respectively. The Company’s total capital to risk weighted assets ratio at March 31, 2026 and 2025, and December 31, 2025 was 15.48%, 15.59% and 15.67%, respectively.
The Company’s liquidity position remains sufficient to fund operations and meet the requirements of borrowers, depositors, and creditors. The Company maintains various sources of liquidity to fund its cash needs. See “Liquidity” herein for a full listing of its sources and anticipated significant contractual obligations.
The Company and Two Rivers Bank enter into financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include lines of credit, letters of credit and other commitments to extend credit. The total outstanding commitments at March 31, 2026 and 2025, were $1.5 billion and $1.5 billion, respectively. See Note 12 - “Commitments and Contingent Liabilities” herein for further information.
The Company has established various accounting policies that govern the application of U.S. generally accepted accounting principles in the preparation of the Company’s consolidated financial statements. The significant accounting policies and use of significant estimates of the Company are described in the footnotes to the consolidated financial statements included in the Company’s 2025 Annual Report on Form 10-K.
The largest source of operating revenue for the Company is net interest income. Net interest income represents the difference between total interest income earned on earning assets and total interest expense paid on interest-bearing liabilities. The amount of interest income is dependent upon many factors, including the volume and mix of earning assets, the general level of interest rates and the dynamics of changes in interest rates. The cost of funds necessary to support earning assets varies with the volume and mix of interest-bearing liabilities and the rates paid to attract and retain such funds.
For analytical purposes, net interest income is presented on a full tax equivalent (TE) basis in the table that follows. The federal statutory rate in effect of 21% for 2026 and 2025 was used. The TE analysis portrays the income tax benefits associated with the tax-exempt assets. The year-to-date net yield on interest-earning assets excluding the TE adjustments of $796,000 and $753,000 for 2026 and 2025, respectively, were 3.74% and 3.56% at March 31, 2026 and 2025, respectively.
The Company’s average balances, fully tax equivalent interest income and interest expense, and rates earned or paid for major balance sheet categories are set forth for the three months ended March 31, 2026 and 2025 in the following table (dollars in thousands):
Average
Balance
Interest-bearing deposits
235,370
2.97
70,701
4.74
376
1.91
75
3.83
1,883
4.51
3,162
4.59
Investment securities (1)
1,147,980
8,383
2.92
1,090,099
7,254
2.66
Loans (TE)(1)(2)(3)
6,285,114
91,284
5.89
5,605,821
80,194
5.80
Total earning assets
7,670,723
101,416
5.36
6,769,858
88,312
5.29
Other nonearning assets
737,565
777,177
(79,202
(70,620
8,329,086
7,476,415
Liabilities and stockholders' equity
Demand deposits, interest-bearing
3,388,750
14,870
1.78
3,039,621
14,900
1.99
Savings deposits
680,418
0.24
640,687
164
0.10
Time deposits
1,228,401
9,506
3.14
1,022,200
8,658
3.44
Total interest-bearing deposits
5,297,569
1.90
4,702,508
2.05
204,173
2.04
201,679
2.37
FHLB advances
271,784
2,335
3.48
194,324
3.77
Federal funds purchased
60,030
7.90
82,608
4.66
27,645
6.87
24,306
7.81
Other debt
6,665
63
1,467
6.63
Total borrowings
570,297
5,061
3.60
504,384
4,428
3.56
Total interest-bearing liabilities
5,867,866
2.06
5,206,892
2.19
Demand deposits
1,393,882
1.67
1,370,107
1.74
59,124
42,962
Stockholders' equity
1,008,214
856,454
Total liabilities and stockholders' equity
71,581
60,162
Net interest spread
3.30
3.10
TE net yield on interest-earning assets
3.78
41
Changes in net interest income may also be analyzed by segregating the volume and rate components of interest income and interest expense. The following table summarizes the approximate relative contribution of changes in average volume and interest rates to changes in net interest income for the three months ended March 31, 2026 and 2025 (in thousands):
Three months ended March 31, 2026Compared to 2025 Increase (Decrease)
Change
Volume (1)
Rate (1)
Earning assets:
899
2,931
(2,032
(15
1,129
394
735
Loans (2)
11,090
9,831
1,259
13,104
13,145
(41
Interest-bearing liabilities:
(30
6,638
(6,668
848
4,874
(4,026
1,052
11,522
(10,470
(155
96
(251
528
1,388
(860
221
(1,448
1,669
243
(243
108
633
387
246
1,685
11,909
(10,224
11,419
1,236
10,183
Net interest income on a tax equivalent basis increased $11.4 million, or 18.98%, to $71.6 million for the three months ended March 31, 2026, from $60.2 million for the same period in 2025. Net interest income on a tax equivalent basis and tax equivalent net interest margin increased primarily due to an increase in earning asset yields and a decrease in deposit rates.
For the three months ended March 31, 2026, average earning assets increased $900.9 million, or 13.31%, and average interest-bearing liabilities increased $661.0 million or 12.69% compared with average balances for the same period in 2025.
The provision for credit losses for the three months ended March 31, 2026 and 2025 was $2.6 million and $1.7 million, respectively. Nonperforming loans were $44.1 million and $26.6 million as of March 31, 2026 and 2025, respectively. Net charge offs were $1.5 million for the three months ended March 31, 2026, compared to net charge offs of $1.8 million for March 31, 2025. For information on credit loss experience and nonperforming loans, see “Nonperforming Loans and Nonperforming Other Assets” and “Loan Quality and Allowance for Credit Losses” herein.
An important source of the Company’s revenue is derived from other income. The following table sets forth the major components of other income for the three months ended March 31, 2026 and 2025 (in thousands):
$ Change
% Change
575
9.9
882
8.9
6.2
201
(111.0
%)
Mortgage banking, net
1.4
13.4
(347
(20.6
(412
(109.9
6.3
The primary reasons for the more significant changes in other income components for the three months ended March 31, 2026 compared to the same period in 2025 are as follows:
The major categories of other expense include salaries and employee benefits, occupancy and equipment expenses and other operating expenses associated with day-to-day operations. The following table sets forth the major components of other expense for the three months ended March 31, 2026 and 2025 (dollars in thousands):
3,268
10.3
1,347
15.9
109.9
91
10.7
Amortization of other intangible assets
70
2.2
(129
(29.9
(376
(12.2
(3.3
(1.3
1,923
49.6
6,253
11.5
The primary reasons for the more significant changes in other expense components for the three months ended March 31, 2026 compared to the same period in 2025 are as follows:
Total income tax expense amounted to $7.6 million for the three months ended March 31, 2026, compared to $6.0 million for the same period in 2025. Effective tax rates were 22.3% for the three months ended March 31, 2026, compared to 21.2% for the same period in 2025. The Company files U.S. federal and state of Florida, Illinois, Indiana, Iowa, Missouri, Texas, and Wisconsin income tax returns.
The Company’s overall investment objectives are to insulate the investment portfolio from undue credit risk, maintain adequate liquidity, insulate capital against changes in market value and control excessive changes in earnings while optimizing investment performance. The types and maturities of securities purchased are primarily based on the Company’s current and projected liquidity and interest rate sensitivity positions.
The following table sets forth the amortized cost of the available-for-sale and held-to-maturity securities as of March 31, 2026 and December 31, 2025 (dollars in thousands):
WeightedAverage Yield
1.24
2.33
2.32
2.74
2.35
26,974
4.24
30,564
4.28
Total securities
1,327,308
2.49
1,218,101
2.25
At March 31, 2026, the amortized cost of the Company’s investment portfolio increased by $109.2 million from December 31, 2025 primarily due to the acquisition of Two Rivers Bank, subsequent sale of their entire portfolio, reinvestment of a portion of the proceeds, and the redeployment of some of the proceeds to other areas of the balance sheet. When purchasing investment securities, the Company considers its overall liquidity and interest rate risk profile, as well as the adequacy of expected returns relative to the risks assumed.
The table below presents the credit ratings as of March 31, 2026 for investment securities (in thousands):
Average Credit Rating of Fair Value at March 31, 2026 (1)
EstimatedFair Value
AAA
AA +/-
A +/-
BBB +/-
< BBB -
Not rated
Obligations of state and political subdivisions
39,873
205,724
27,680
1,959
Mortgage-backed securities (2)
2,791
4,105
17,009
349,303
30,471
752,319
Equity securities:
Federal Agricultural Mtg Corp
152
550
Midwest Independent BankersBank
150
233
Equalize Community Development Fund
3,934
Total equity securities
4,236
The following table indicates the expected maturities of investment securities classified as available-for-sale presented at fair value, and held-to-maturity presented at amortized cost, at March 31, 2026, and the weighted average yield for each range of maturities (dollars in thousands):
One yearor less
After 1through5 years
After 5through10 years
Afterten years
133,713
9,866
57,417
210,229
7,265
325
1,639
21,888
40,130
669,694
17,618
6,287
210,387
248,270
47,395
670,019
Weighted average yield
2.20
2.71
2.78
2.50
Full tax equivalent yield
2.13
2.68
2.88
2.79
Held to maturity:
Total held-to-maturity
The weighted average yields are calculated on the basis of the amortized cost and effective yields weighted for the scheduled maturity of each security. Tax equivalent yields have been calculated using a 21% tax rate. With the exception of obligations of the U.S. Treasury and other U.S. government agencies and corporations, there were no investment securities of any single issuer, which the book value exceeded 10% of stockholders' equity at March 31, 2026. Investment securities carried at approximately $481.4 million
45
and $473.8 million at March 31, 2026, and December 31, 2025, respectively, were pledged to secure public deposits and repurchase agreements and for other purposes as permitted or required by law.
The loan portfolio (net of unearned interest) is the largest category of the Company’s earning assets. The following table summarizes the composition of the loan portfolio, including loans held for sale, as of March 31, 2026, and December 31, 2025 (dollars in thousands):
OutstandingLoans %
4.6
6.0
5.8
10.6
8.1
6.6
5.6
42.5
42.7
70.1
68.6
5.3
5.1
21.6
23.0
0.6
0.5
2.4
2.8
100.0
Loan balances increased $932.9 million, or 15.5%. The increase was primarily due to the acquisition of Two Rivers. The balance of real estate loans held for sale, included in the balances shown above, amounted to $4.9 million and $5.2 million as of March 31, 2026 and December 31, 2025, respectively.
Commercial and commercial real estate loans generally involve higher credit risks than residential real estate and consumer loans. Because payments on loans secured by commercial real estate or equipment are often dependent upon the successful operation and management of the underlying assets, repayment of such loans may be influenced to a great extent by conditions in the market or the economy. The Company does not have any sub-prime mortgages or credit card loans outstanding which are also generally considered to be higher credit risk.
First Mid Bank and Two Rivers Bank do not have a concentration, as defined by the regulatory agencies and land development loans or commercial real estate loans as a percentage of the total amount of the Company's total capital for the periods shown above. At March 31, 2026 and December 31, 2025, First Mid Bank and Two Rivers Bank did have industry loan concentrations in excess of 25% of the sum of Tier 1 Capital and allowance for loan loss in the following industries (dollars in thousands):
PrincipalBalance
Outstanding Loans %
Other grain farming
646,388
9.31
577,903
9.61
Lessors of non-residential buildings
1,293,142
18.62
1,109,224
18.45
Lessors of residential buildings and dwellings
756,099
10.89
641,822
10.68
225,569
3.75
First Mid Bank and Two Rivers Bank had no further industry loan concentrations in excess of 25% of the sum of Tier 1 Capital and allowance for loan loss.
46
The following table presents the balance of loans outstanding as of March 31, 2026, by contractual maturities (in thousands):
Maturity (1)
One Yearor Less (2)
Over 1 Through5 Years
Over 5 Years
75,530
201,884
39,309
56,239
133,434
211,110
39,056
144,793
550,204
127,960
204,121
124,104
499,272
1,754,086
694,666
798,057
2,438,318
1,619,393
249,045
117,449
4,437
527,551
556,749
414,779
3,699
33,798
2,100
32,660
32,950
113,291
1,611,012
3,179,264
2,154,000
As of March 31, 2026, loans with maturities over one year consisted of approximately $3.2 billion in fixed rate loans and approximately $2.1 billion in variable rate loans. The loan maturities noted above are based on the contractual provisions of the individual loans. The Company has no general policy regarding renewals and borrower requests, which are handled on a case-by-case basis.
Nonperforming loans include: (a) loans accounted for on a nonaccrual basis; (b) accruing loans contractually past due ninety days or more as to interest or principal payments; and (c) loans not included in (a) and (b) above which are defined as “modified.” Repossessed assets include primarily repossessed real estate and automobiles.
The Company’s policy is to discontinue the accrual of interest income on any loan for which principal or interest is 90 days past due. The accrual of interest is discontinued earlier when, in the opinion of management, there is reasonable doubt as to the timely collection of interest or principal. Once interest accruals are discontinued, accrued but uncollected interest is charged against current year income. Subsequent receipts on nonaccrual loans are recorded as a reduction of principal, and interest income is recorded only after principal recovery is reasonably assured. Nonaccrual loans are returned to accrual status when, in the opinion of management, the financial position of the borrower indicates there is no longer any reasonable doubt as to the timely collection of interest or principal.
Restructured loans are loans on which, due to deterioration in the borrower’s financial condition, the original terms have been modified in favor of the borrower or either principal or interest has been forgiven. Repossessed assets represent property acquired as the result of borrower defaults on loans. These assets are recorded at estimated fair value, less estimated selling costs, at the time of foreclosure or repossession. Write-downs occurring at foreclosure are charged against the allowance for credit losses. On an ongoing basis, properties are appraised as required by market indications and applicable regulations. Write-downs for subsequent declines in value are recorded in non-interest expense in other real estate owned along with other expenses related to maintaining the properties.
The following table presents information concerning the aggregate amount of nonperforming loans and repossessed assets at March 31, 2026 and December 31, 2025 (dollars in thousands):
Nonaccrual loans
Modified loans which are performing in accordance with revised terms
883
895
Total nonperforming loans
44,074
31,948
Repossessed assets
5,547
2,859
Total nonperforming loans and repossessed assets
49,621
34,807
Nonperforming loans to loans, before allowance for credit losses
0.63
0.53
Nonperforming loans and repossessed assets to loans, before allowance for credit losses
0.71
0.58
47
The $12.1 million increase in nonaccrual loans during 2026 resulted from the net of $10.9 million of loans acquired from Two Rivers Bank, $5.8 million of loans put on nonaccrual status, offset by $1.1 million of loans becoming current or paid-off, $2.0 million of loans transferred to other real estate owned, and $1.5 million loans charged off.
The following table summarizes the composition of nonaccrual loans (dollars in thousands):
% of Total
19.6
3.6
3.8
17.8
18.6
1.2
19.3
33.4
61.5
57.0
5.9
0.1
7.1
0.4
25.1
36.0
Interest income that would have been reported if nonaccrual and restructured loans had been performing totaled $501,000 and $471,000 for the three months ended March 31, 2026 and 2025, respectively.
The $2.7 million increase in repossessed assets during 2026 resulted from $3.0 million of additional assets repossessed and $280,000 of repossessed assets sold, $50,000 of write-downs on existing assets, and no deferred fair value marks were recognized. The following table summarizes the composition of repossessed assets (dollars in thousands):
698
12.6
772
27.0
71
1.3
0.9
56
2.0
4,709
84.9
71.0
Total real estate
99.7
99.9
0.3
Total repossessed collateral
Repossessed assets sold during the first three months of 2026 resulted in net losses of $2,000 related to real estate asset sales and no net losses related to other assets sales. The Company also recognized no deferred losses, recorded $50,000 of write-downs on real estate properties owned and recorded no change in fair market value discount.
The allowance for credit losses represents management’s estimate of the reserve necessary to adequately account for probable losses existing in the current portfolio. The provision for credit losses is the charge against current earnings that is determined by management as the amount needed to maintain an adequate allowance for credit losses. In determining the adequacy of the allowance for credit losses, and therefore the provision to be charged to current earnings, management relies predominantly on a disciplined credit review and approval process that extends to the full range of the Company’s credit exposure. The review process is directed by overall lending policy and is intended to identify, at the earliest possible stage, borrowers who might be facing financial difficulty. Once identified, the magnitude of exposure to individual borrowers is quantified in the form of specific allocations of the allowance for credit losses. Management considers collateral values and guarantees in the determination of such specific allocations. Additional factors considered by management in evaluating the overall adequacy of the allowance include historical net credit losses, the level and composition of nonaccrual, past due and renegotiated loans, trends in volumes and terms of loans, effects of changes in risk selection and underwriting standards or lending practices, lending staff changes, concentrations of credit, industry conditions and the current economic conditions in the region where the Company operates.
Management reviews economic factors including the potential for reduced cash flow for commercial operating loans from reduction in sales or increased operating costs, decreased occupancy rates for commercial buildings, the uncertainty regarding grain prices,
48
increased operating costs for farmers, and increased levels of unemployment impacting consumers’ ability to pay. Each of these economic uncertainties was taken into consideration in developing the level of the reserve. Management considers the allowance for credit losses a critical accounting policy.
Management recognizes there are risk factors that are inherent in the Company’s loan portfolio. All financial institutions face risk factors in their loan portfolios because risk exposure is a function of the business. A portion of the Company’s operations (and therefore its loans) are concentrated in Illinois, where agriculture is the dominant industry. Accordingly, lending and other business relationships with agriculture-based businesses are critical to the Company’s success. At March 31, 2026, the Company’s loan portfolio included $775.4 million of loans to borrowers whose businesses are directly related to agriculture. Of this amount, $646.4 million was concentrated in other grain farming. Total loans to borrowers whose businesses are directly related to agriculture increased $93.9 million from $681.4 million at December 31, 2025 while loans concentrated in other grain farming increased $68.5 million from $577.9 million at December 31, 2025. While the Company adheres to sound underwriting practices, including collateralization of loans, any extended period of low commodity prices, drought conditions, significantly reduced yields on crops and/or reduced levels of government assistance to the agricultural industry could result in an increase in the level of problem agriculture loans and potentially result in credit losses within the agricultural portfolio. The Company also has $1.3 billion loans to lessors of non-residential buildings and $756.1 million loans to lessors of residential buildings and dwellings.
The structure of the Company’s loan approval process is based on progressively larger lending authorities granted to individual loan officers, loan committees, and ultimately the Board of Directors. Outstanding balances to one borrower or affiliated borrowers are limited by federal regulation; however, limits well below the regulatory thresholds are generally observed. Most of the Company’s loans are to businesses located in the geographic market areas served by the Company’s branch network. Additionally, a significant portion of the collateral securing the loans in the portfolio is located within the Company’s primary geographic footprint. In general, the Company adheres to loan underwriting standards consistent with industry guidelines for all loan segments.
The Company minimizes credit risk by adhering to sound underwriting and credit review policies. Management and the Board of Directors of the Company review these policies at least annually. Senior management is actively involved in business development efforts and the maintenance and monitoring of credit underwriting and approval. The loan review system and controls are designed to identify, monitor, and address asset quality problems in an accurate and timely manner. On a quarterly basis, the Board of Directors and management review the status of problem loans and determine the best estimate of the allowance. In addition to internal policies and controls, regulatory authorities periodically review asset quality and the overall adequacy of the allowance for credit losses.
Analysis of the allowance for credit losses as of March 31, 2026 and 2025, and of changes in the allowance for the three months ended March 31, 2026 and 2025, is summarized as follows (dollars in thousands):
Average loans outstanding, net of unearned income
Allowance-beginning of period
Initial allowance on loans purchased
Charge-offs:
338
1,117
223
366
Total charge-offs
2,083
Recoveries:
Total recoveries
Net charge-offs (recoveries)
1,500
1,783
Provision (release) for credit losses
Allowance-end of period
Ratio of annualized net charge-offs to average loans
0.13
Ratio of allowance for credit losses to loans outstanding (less unearned interest at end of period)
1.25
1.23
Ratio of allowance for credit losses to nonperforming loans
The allowance for credit losses to nonperforming loans ratio has decreased due to the acquired nonperforming loans from Two Rivers Bank. Management believes that the overall estimate of the allowance for credit losses appropriately accounts for probable losses attributable to current exposures.
During the first three months of 2026, the Company had net charge offs of $1.5 million compared to net charge offs of $1.8 million during the same period of 2025. During the first three months of 2026, the Company had the following significant charge offs, two commercial real estate loans to one borrower totaling $1.1 million and one commercial loan to one borrower totaling $290,000. During the first three months of 2025, the Company had the following significant charge offs, one commercial real estate loan to one borrower totaling $338,000, three agricultural loans to two borrowers totaling $996,000, and one commercial operating loan to one borrower totaling $145,000.
Funding of the Company’s earning assets is substantially provided by a combination of consumer, commercial and public fund deposits. The Company continues to focus its strategies and emphasis on commercial and retail core deposits, the major component of funding sources. The following table sets forth the average deposits and weighted average rates for the three months ended March 31, 2026 and for the year-ended December 31, 2025 (dollars in thousands):
Year-ended December 31, 2025
AverageBalance
WeightedAverageRate
Demand deposits:
1,353,150
3,132,691
1.96
Savings
633,186
0.12
1,074,940
3.37
Total average deposits
6,691,451
1.50
6,193,967
1.59
During the first three months of 2026, the average balance of deposits increased by $497.5 million from the average balance for the year-ended December 31, 2025. The increase in the first three months of 2026 was primarily due to the acquisition of Two Rivers.
Balances of time deposits of more than $250,000 include time deposits maintained for public fund entities and consumer time deposits. The following table sets forth the maturity of time deposits of more than $250,000 at March 31, 2026 and December 31, 2025 (in thousands):
Three months or less
190,279
230,788
Over three months through twelve months
299,230
129,513
Over one year through three years
52,996
57,451
Over three years
4,648
2,512
547,153
420,264
Securities sold under agreements to repurchase are short-term obligations of First Mid Bank. These obligations are collateralized with certain government securities that are direct obligations of the United States or one of its agencies. These retail repurchase agreements are a cash management service to corporate customers. Other borrowings consist of Federal Home Loan Bank (“FHLB”) advances, federal funds purchased, loans (short-term or long-term debt) that the Company has outstanding, subordinated debt and junior subordinated debentures.
Information relating to securities sold under agreements to repurchase and other borrowings as of March 31, 2026 and December 31, 2025 is presented below (dollars in thousands):
Federal Home Loan Bank advances:
FHLB-overnight
Fixed term-due in one year or less
27,811
25,000
Fixed term-due after one year
247,369
245,000
Other borrowings:
Debt due in one year or less
Debt due after one year
19,367
598,011
551,178
Average interest rate at end of period
3.62
Maximum outstanding at any month-end:
214,360
219,772
50,000
4,000
87,505
Averages for the period (YTD):
199,430
6,142
25,968
16,616
245,816
203,363
187
361
6,480
76,140
24,376
570,299
526,467
Average interest rate during the period
3.51
Securities sold under agreement to repurchase increased $12.1 million during the three months ended March 31, 2026 primarily due to the seasonal demands in balances and changes in cash flow needs of various customers. FHLB advances represent borrowings by First Mid Bank and Two Rivers Bank to economically fund loan demand. At March 31, 2026, the advances consisted of $275.2 million with a weighted-average interest rate of 3.40% and maturities from May 2026 to March 2035.
The Company is party to a revolving credit agreement with The Northern Trust Company in the amount of $15.0 million. The balance of this line of credit was $0 as of March 31, 2026. This loan was renewed on April 4, 2025 for one year as a revolving credit agreement with a maximum available balance of $15.0 million. The interest rate is floating at 2.25% over the federal funds rate. The Company and its subsidiary banks were in compliance with the existing covenants at March 31, 2026 and 2025, and December 31, 2025.
On October 6, 2020, the Company issued and sold $96.0 million in aggregate principal amount of its 3.95% Fixed-to-Floating Rate Subordinated Notes due 2030 (the “Notes”). The Notes were issued pursuant to the Indenture, dated as of October 6, 2020 (the “Base Indenture”), between the Company and U.S. Bank National Association, as trustee (the “Trustee”), as supplemented by the First Supplemental Indenture, dated as of October 6, 2020 (the “Supplemental Indenture”), between the Company and the Trustee. The Base Indenture, as amended and supplemented by the Supplemental Indenture, governs the terms of the Notes and provides that the Notes are unsecured, subordinated debt obligations of the Company and will mature on October 15, 2030. From and including the date of issuance to, but excluding October 15, 2025, the Notes bore interest at an initial rate of 3.95% per annum. From and including October 15, 2025 to, but excluding the maturity date or earlier redemption, the Notes will bear interest at a floating rate equal to three-month Term SOFR plus a spread of 383 basis points, or such other rate as determined pursuant to the Supplemental Indenture, provided that in no event shall the applicable floating interest rate be less than zero per annum (7.5% and 3.95% at March 31, 2026 and 2025, respectively). On June 7, 2024, August 27, 2024, and September 6, 2024, the Company repurchased in open market transactions and subsequently cancelled $4.0 million, $15.0 million, and $1.0 million respectively, of the outstanding Notes. On October 15, 2025, the Company paid down $20 million of the outstanding Notes. As a result, as of March 31, 2026, $56 million in aggregate principal amount of the Notes remain issued and outstanding.
The Company may, beginning with the interest payment date of October 15, 2025, and on any interest payment date thereafter, redeem the Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of the Notes to be redeemed plus accrued and unpaid interest to but excluding the date of redemption. The Company may also redeem the Notes at any time, including prior to October 15, 2025, at the Company’s option, in whole but not in part, if: (i) a change or prospective change in law occurs that could prevent the Company from deducting interest payable on the Notes for U.S. federal income tax purposes; (ii) a subsequent event occurs that could preclude the Notes from being recognized as Tier 2 capital for regulatory capital purposes; or (iii) the Company is required to register as an investment company under the Investment Company Act of 1940, as amended; in each case, at a redemption price equal to 100% of the principal amount of the Notes plus any accrued and unpaid interest to but excluding the redemption date.
On August 15, 2023, the Company assumed, as part of the Blackhawk Bancorp, Inc. acquisition, $7.5 million principal amount of 3.5% Fixed-to-Floating Rate Subordinated Notes due 2031 (“Blackhawk Subordinated Debt I”). Blackhawk Subordinated Debt I was issued pursuant to Indenture between the Company and UMB Bank, as trustee. This Indenture governs the terms of the Blackhawk Subordinated Debt I and provides that such notes are unsecured, subordinated debt obligations of the Company and will mature on May 14, 2031. From and including the date of issuance to, but excluding May 14, 2026, the notes will bear interest at an initial rate of 3.5% per annum. From and including May 14, 2026 to, but excluding the maturity date, the notes will bear interest at a floating rate equal to three-month Term SOFR plus a spread of 285 basis points. On February 5, 2025, the Company repurchased in open market transactions and subsequently cancelled $3.0 million of the outstanding Blackhawk Subordinated Debt I Notes. As a result, as of March 31, 2026, $4.5 million in aggregate principal amount of Blackhawk Subordinated Debt I Notes remain issued and outstanding.
On August 15, 2023, the Company assumed, as part of the Blackhawk Bancorp, Inc. acquisition, $7.5 million principal amount of 3.875% Fixed-to-Floating Rate Subordinated Notes due 2036 (“Blackhawk Subordinated Debt II”). Blackhawk Subordinated Debt II was issued pursuant to Indenture between the Company and UMB Bank, as trustee. This Indenture governs the terms of the Blackhawk Subordinated Debt II and provides that such notes are unsecured, subordinated debt obligations of the Company and will mature on May 14, 2036. From and including the date of issuance to, but excluding May 14, 2031, the notes will bear interest at an initial rate of 3.875% per annum. From and including May 14, 2031 to, but excluding the maturity date, the notes will bear interest at a floating rate equal to three-month Term SOFR plus a spread of 255 basis points. On February 5, 2025, the Company repurchased in open market transactions and subsequently cancelled $7.0 million of the outstanding Blackhawk Subordinated Debt II Notes. As a result, as of March 31, 2026, $500,000 in aggregate principal amount of Blackhawk Subordinated Debt II Notes remain issued and outstanding.
On February 28, 2026, the Company assumed, as part of the Two Rivers acquisition, $20.0 million principal amount of 3.75% Fixed-to-Floating Rate Note Payable due 2029 (“Two Rivers Note Payable”). Two Rivers Note Payable was issued pursuant to Indenture between the Company and Bankers Bank, as trustee. This Indenture governs the terms of the Two Rivers Note Payable and provides that such note is unsecured and will mature on September 30, 2029. From and including the date of issuance to, but excluding the date of merger of Two Rivers Bank and First Mid Bank, the notes will bear interest at an initial rate of 3.75% per annum. From and including the date of merger of Two Rivers Bank and First Mid Bank to, but excluding the maturity date, the notes will bear interest at a floating rate equal to thirty-day Term SOFR plus a spread of 275 basis points. As of March 31, 2026, $19.9 million in aggregate principal amount of the Two Rivers Note Payable remains issued and outstanding.
On April 26, 2006, the Company completed the issuance and sale of $10 million of fixed/floating rate trust preferred securities through First Mid-Illinois Statutory Trust II (“Trust II”), a statutory business trust and wholly owned unconsolidated subsidiary of the Company, as part of a pooled offering. The Company established Trust II for the purpose of issuing the trust preferred securities. The $10.0 million in proceeds from the trust preferred issuance and an additional $310,000 for the Company’s investment in common equity of Trust II, a total of $10.3 million, was invested in junior subordinated debentures of the Company. The underlying junior subordinated debentures issued by the Company to Trust II mature in 2036, bore interest at a fixed rate of 6.98% paid quarterly until
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June 15, 2011 and then converted to floating rate (SOFR plus 160 basis points) after June 15, 2011 (5.54% and 5.59% at March 31, 2026 and December 31, 2025, respectively). The net proceeds to the Company were used for general corporate purposes, including the Company’s acquisition of Mansfield Bancorp, Inc. in 2006.
On September 8, 2016, the Company assumed the trust preferred securities of Clover Leaf Statutory Trust I (“CLST I”), a statutory business trust that was a wholly owned unconsolidated subsidiary of First Clover Financial. The $4.0 million of trust preferred securities and an additional $124,000 additional investment in common equity of CLST I, is invested in junior subordinated debentures issued to CLST I. The subordinated debentures matured in 2035, bear interest at three-month SOFR plus 185 basis points (5.79% and 5.84% at March 31, 2026 and December 31, 2025, respectively) and reset quarterly.
On May 1, 2018, the Company assumed the trust preferred securities of FBTC Statutory Trust I (“FBTCST I”), a statutory business trust that was a wholly owned unconsolidated subsidiary of First BancTrust Corporation. The $6.0 million of trust preferred securities and an additional $186,000 additional investment in common equity of FBTCST I is invested in junior subordinated debentures issued to FBTCST I. The subordinated debentures mature in 2035, bear interest at three-month SOFR plus 170 basis points (5.64% and 5.69% at March 31, 2026 and December 31, 2025, respectively) and reset quarterly.
On August 15, 2023, the Company assumed the trust preferred securities of Blackhawk Statutory Trust I (“BHST I”), a statutory business trust that was a wholly owned unconsolidated subsidiary of Blackhawk Bancorp, Inc. The $1.0 million trust preferred securities and an additional $31,000 investment in common equity of BHST I is invested in junior subordinated debentures issued to BHST I. The subordinated debentures mature in 2032, bear interest at three-month SOFR plus 325 basis points (7.22% and 7.20% at March 31, 2026 and December 31, 2025, respectively) and reset quarterly.
On August 15, 2023, the Company assumed the trust preferred securities of Blackhawk Statutory Trust II (“BHST II”), a statutory business trust that was a wholly owned unconsolidated subsidiary of Blackhawk Bancorp, Inc. The $4.0 million of trust preferred securities and an additional $124,000 investment in common equity of BHST II is invested in junior subordinated debentures issued to BHST II. The subordinated debentures mature in 2035, bear interest at three-month SOFR plus 205 basis points (6.00% and 6.02% at March 31, 2026 and December 31, 2025, respectively) and reset quarterly.
On February 28, 2026, the Company assumed the trust preferred securities of Great River Capital Trust I (“GRCT I”), a statutory business trust that was a wholly owned unconsolidated subsidiary of Two Rivers. The $10.0 million of trust preferred securities and an additional $310,000 investment in common equity of GRCT I is invested in junior subordinated debentures issued to GRCT I. The subordinated debentures mature in 2035, bear interest at three-month SOFR plus 175 basis points (5.69% at March 31, 2026) and reset quarterly.
The trust preferred securities issued by Trust II, CLST I, FBTCST I, BHST I, BHST II, and GRCT I are included as Tier 1 capital of the Company for regulatory capital purposes. On March 1, 2005, the Federal Reserve Board adopted a final rule that allows the continued limited inclusion of trust preferred securities in the calculation of Tier 1 capital for regulatory purposes. The final rule provided a five-year transition period, ending September 30, 2010, for application of the revised quantitative limits. On March 17, 2009, the Federal Reserve Board adopted an additional final rule that delayed the effective date of the new limits on inclusion of trust preferred securities in the calculation of Tier 1 capital until March 31, 2012. The application of the revised quantitative limits did not and is not expected to have a significant impact on its calculation of Tier 1 capital for regulatory purposes or its classification as well-capitalized. The Dodd-Frank Act, signed into law July 21, 2010, removes trust preferred securities as a permitted component of a holding company’s Tier 1 capital after a three-year phase-in period beginning January 1, 2013, for larger holding companies. For holding companies with less than $15 billion in consolidated assets, existing issues of trust preferred securities are grandfathered and not subject to this new restriction. New issuances of trust preferred securities, however, would not count as Tier 1 regulatory capital.
In addition to requirements of the Dodd-Frank Act discussed above, the act also required the federal banking agencies to adopt rules that prohibit banks and their affiliates from engaging in proprietary trading and investing in and sponsoring certain unregistered investment companies (defined as hedge funds and private equity funds). This rule is generally referred to as the “Volcker Rule.” On December 10, 2013, the federal banking agencies issued final rules to implement the prohibitions required by the Volcker Rule. Following the publication of the final rule, and in reaction to concerns in the banking industry regarding the adverse impact the final rule’s treatment of certain collateralized debt instruments has on community banks, the federal banking agencies approved a final rule to permit banking entities to retain interests in certain collateralized debt obligations backed primarily by trust preferred securities. Under the final rule, the agencies permit the retention of an interest in or sponsorship of covered funds by banking entities under $15 billion in assets if (1) the collateralized debt obligation was established and issued prior to May 19, 2010, (2) the banking entity reasonably believes that the offering proceeds received by the collateralized debt obligation were invested primarily in qualifying trust preferred collateral, and (3) the banking entity’s interests in the collateralized debt obligation was acquired on or prior to December 10, 2013. Although the Volcker Rule impacts many large banking entities, the Company does not currently anticipate that the Volcker Rule will have a material effect on the operations of the Company, First Mid Bank, or Two Rivers Bank.
The Company seeks to maximize its net interest margin while maintaining an acceptable level of interest rate risk. Interest rate risk can be defined as the amount of forecasted net interest income that may be gained or lost due to changes in the interest rate environment, a variable over which management has no control. Interest rate risk, or sensitivity, arises when the maturity or repricing characteristics of interest-bearing assets differ significantly from the maturity or repricing characteristics of interest-bearing liabilities. The Company monitors its interest rate sensitivity position to maintain a balance between rate sensitive assets and rate sensitive liabilities. This balance serves to limit the adverse effects of changes in interest rates. The Company’s asset liability management committee (ALCO) oversees the interest rate sensitivity position and directs the overall allocation of funds.
In the banking industry, a traditional way to measure potential net interest income exposure to changes in interest rates is through a technique known as “static GAP” analysis which measures the cumulative differences between the amounts of assets and liabilities maturing or repricing at various intervals. The Company has also assumed prepayments of loan assets in amounts consistent with market expectations. By comparing the volumes of interest-bearing assets and liabilities that have contractual maturities, repricing points, and prepayments at various times in the future, management can gain insight into the amount of interest rate risk embedded in the balance sheet.
The following table sets forth the Company’s interest rate repricing GAP for selected maturity periods at March 31, 2026 (dollars in thousands):
Rate Sensitive Within
1 Year
1-3 Years
3-5 Years
Interest-earning assets:
Federal funds sold and other interest-bearing deposits
412,139
Taxable investment securities
68,021
230,180
44,311
572,433
914,945
Nontaxable investment securities
55,042
53,682
153,855
5,535
268,114
3,903,470
1,732,616
926,460
381,730
6,658,402
4,441,732
2,016,478
1,124,626
959,698
8,542,534
8,256,660
Demand deposits and savings accounts
1,671,100
1,504,420
3,175,520
Money market accounts
1,307,240
Other time deposits
1,441,210
117,257
15,879
786
1,575,132
Short-term borrowings/debt
209,370
Long-term borrowings/debt
240,877
100,680
46,689
395
388,641
387,254
4,869,797
217,937
62,568
1,505,601
6,655,903
6,583,300
Rate sensitive assets-rate sensitive liabilities
(428,065
1,798,541
1,062,058
(545,903
1,886,631
Cumulative GAP
1,370,476
2,432,534
Cumulative amounts as % of total rate sensitive assets
(5.0
21.1
12.4
(6.4
Cumulative Ratio
16.0
28.5
22.1
The static GAP analysis shows that at March 31, 2026, the Company was liability sensitive, on a cumulative basis, through the twelve-month time horizon. This indicates that future increases in interest rates could have an adverse effect on net interest income. There are several ways the Company measures and manages its exposure to interest rate sensitivity, including static GAP analysis. The Company’s ALCO also uses other financial models to project interest income under various rate scenarios and prepayment/extension assumptions consistent with First Mid Bank and Two Rivers Bank’s historical experience and with known industry trends. ALCO meets at least monthly to review the Company’s exposure to interest rate changes as indicated by the various techniques and to make necessary changes in the composition terms and/or rates of the assets and liabilities.
At March 31, 2026, the Company’s stockholders' equity had increased $117.9 million, or 12.3%, to $1.1 billion from $958.7 million as of December 31, 2025. During the three months ended March 31, 2026, net income contributed $26.3 million to equity before the
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payment of dividends to stockholders of $6.0 million. The change in market value of available-for-sale investment securities decreased stockholders' equity by $7.4 million, net of tax. The acquisition of Two Rivers increased equity by $104.2 million during the first three months of 2026.
Deferred Compensation Plan. The Company follows the provisions of the Emerging Issues Task Force Issue No. 97-14, “Accounting for Deferred Compensation Arrangements Where Amounts Earned Are Held in a Rabbi Trust and Invested” (“EITF 97-14”), which was codified into ASC 710-10, for purposes of the First Mid Bancshares, Inc. Amended and Restated Deferred Compensation Plan (“DCP”). At March 31, 2026, the Company classified the cost basis of its common stock issued and held in trust in connection with the DCP of approximately $7.0 million as treasury stock. The Company also classified the cost basis of its related deferred compensation obligation of approximately $7.0 million as an equity instrument (deferred compensation).
The DCP was effective as of June 1984. The purpose of the DCP is to enable directors, advisory directors, and key employees the opportunity to defer a portion of the fees and cash compensation paid by the Company as a means of maximizing the effectiveness and flexibility of compensation arrangements. The Company invests all participants’ deferrals in shares of common stock. Dividends paid on the shares are credited to participants’ DCP accounts and invested in additional shares.
First Retirement and Savings Plan. The First Retirement Savings Plan (“401(k) plan”) was effective beginning in 1985. Employees are eligible to participate in the 401(k) plan after three months of service with the Company.
Stock Incentive Plan. At the Annual Meeting of Stockholders held April 26, 2017, the stockholders approved the 2017 Stock Incentive Plan (“SI Plan”). The SI Plan was implemented to succeed the Company’s 2007 Stock Incentive Plan, which had a ten-year term. At the Annual Meeting of Stockholders held on April 30, 2025, the stockholders approved amendments to the SI Plan to change the name of the plan to the 2025 Stock Incentive Plan and to extend the term of the plan to January 21, 2035. The SI Plan is intended to provide a means whereby directors, employees, consultants and advisors of the Company and its Subsidiaries may sustain a sense of proprietorship and personal involvement in the continued development and financial success of the Company and its Subsidiaries, thereby advancing the interests of the Company and its stockholders. Accordingly, directors and selected employees, consultants and advisors may be provided the opportunity to acquire shares of Common Stock of the Company on the terms and conditions established in the SI Plan.
Following the stockholders' approval at the 2025 annual meeting of the Company, a maximum of 1 million shares of common stock may be issued under the SI Plan. During the three months ended March 31, 2026 and 2025, the Company awarded 88,975 and 84,097 shares as stock and stock unit awards, respectively.
Stock Repurchase Program. On June 24, 2025, the Board of Directors approved a repurchase program (the “2025 Repurchase Program”), which became effective on July 1, 2025. The 2025 Repurchase Program supersedes all previous repurchase plans and authorizes the Company to repurchase up to 1.2 million shares of the Company’s common stock. During three months ended March 31, 2026, the Company repurchased 12,686 shares. As of March 31, 2026, the Company had approximately 1.2 million shares or approximately $48.9 million in remaining capacity under the 2025 Repurchase Program.
Although the Company adopted the repurchase plan, the Company may make discretionary repurchases in the open market or in privately negotiated transactions from time to time. The timing, manner, price, and amount of any such repurchases will be determined by the Company at its discretion and will depend upon a variety of factors including economic and market conditions, price, applicable legal requirements, and other factors.
Employee Stock Purchase Plan. At the Annual Meeting of Stockholders held April 25, 2018, the stockholders approved the First Mid Bancshares, Inc. Employee Stock Purchase Plan (“ESPP”). The ESPP provides eligible employees with the opportunity to purchase shares of common stock of the Company at a 15% discount through payroll deductions. The ESPP is intended to qualify as an employee stock purchase plan under Section 423 of the Internal Revenue Code. A maximum of 600,000 shares of common stock may be issued under the ESPP. During the three months ended March 31, 2026 and 2025, 6,975 shares and 6,891 shares, respectively, were issued pursuant to the ESPP. As of March 31, 2026, there were 437,048 shares unassigned but available to be issued under the ESPP.
Liquidity represents the ability of the Company and its subsidiaries to meet all present and future financial obligations arising in the daily operations of the business. Financial obligations consist of the need for funds to meet extensions of credit, deposit withdrawals, and debt servicing. The Company’s liquidity management focuses on the ability to obtain funds economically through assets that may be converted into cash at minimal costs or through other sources. The Company’s other sources of cash include overnight federal fund lines, Federal Home Loan Bank advances, the ability to borrow at the Federal Reserve Bank of Chicago and Des Moines, and the Company’s operating line of credit with The Northern Trust Company. Details for these sources include:
Management continues to monitor its expected liquidity requirements carefully, focusing primarily on cash flow from:
The following table summarizes significant contractual obligations and other commitments at March 31, 2026 (in thousands):
Less than
More than
5 Years
Subordinated debt, net and junior subordinated debt, net
94,094
55,637
38,457
503,917
237,181
76,731
165,005
Operating leases
3,622
5,905
3,326
Supplemental retirement
2,013
250
400
1,313
2,190,607
1,682,063
200,143
240,247
68,154
For the three months ended March 31, 2026, net cash of $25.1 million was provided by operating activities, $79.5 million was provided by investing activities, and $117.5 million was provided by financing activities. In total, cash and cash equivalents increase by $222.1 million from year-end 2025.
There has been no material change in the market risk faced by the Company since December 31, 2025. For information regarding the Company’s market risk, refer to the Company’s Annual Report on Form 10-K for the year-ended December 31, 2025.
The Company’s management carried out an evaluation, under the supervision and with the participation of the chief executive officer and the chief financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of March 31, 2026. Based upon that evaluation, the chief executive officer along with the chief financial officer concluded that the Company’s disclosure controls and procedures as of March 31, 2026, were effective.
There were no changes in the Company’s internal control over financial reporting that occurred during the Company's last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
ITEM 1. LEGAL PROCEEDINGS
From time to time the Company and its subsidiaries may be involved in litigation that the Company believes is a type common to our industry. None of any such existing claims are believed to be individually material at this time to the Company, although the outcome of any such existing claims cannot be predicted with certainty.
Various risks and uncertainties, some of which are difficult to predict and beyond the Company’s control, could negatively impact the Company. As a financial institution, the Company is exposed to credit risk, interest rate and liquidity risk, operational risk, risks from economic and market conditions, and other general business risks, among others. Adverse experience with these or other risks could have a material impact on the Company’s financial condition and results of operations, as well as the value of its common stock.
See the risk factors and “Supervision and Regulation General” described in the Company’s Annual Report on Form 10-K for the year-ended December 31, 2025. 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, 2025.
The Company’s common stock is included for quotation on the NASDAQ Stock Market, LLC under the trading symbol “FMBH.”
The Company’s shareholders are entitled to receive dividends as are declared by the Board of Directors, which considered quarterly payment of dividends during 2026. The ability of the Company to pay dividends, as well as fund its operations, is dependent upon receipt of dividends from First Mid Bank and Two Rivers Bank. Regulatory authorities limit the amount of dividends that can be paid by First Mid Bank or Two Rivers Bank without prior approval from such authorities. For further discussion of the Bank’s dividend restrictions, see Item 1 – “Business” – “First Mid Bank” – “Dividends” and Note 16 – “Dividend Restrictions” described in the Company's Annual Report on Form 10-K for the year-ended December 31, 2025.
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The following table summarizes share repurchase activity for the quarter ending March 31, 2026:
ISSUER PURCHASES OF EQUITY SECURITIES
Period
(a) TotalNumberof SharesPurchased
(b) AveragePrice Paidper Share
(c) TotalNumberof SharesPurchasedas Part ofPubliclyAnnouncedPlans orPrograms
(d) ApproximateDollar Valueof Sharesthat MayYet BePurchasedUnder thePlans orPrograms atEnd of Period
January 1, 2026 - January 31, 2026
50,520,000
February 1, 2026 - February 28, 2026
49,212,000
March 1, 2026 - March 31, 2026
12,686
39.45
48,905,464
On June 24, 2025, the Board of Directors approved a repurchase program (the “2025 Repurchase Program”), which became effective on July 1, 2025. The 2025 Repurchase Program supersedes all previous repurchase plans and authorizes the Company to repurchase up to 1.2 million shares of the Company's common stock. During the three months ended March 31, 2026, the Company repurchased 12,686 shares through this plan.
See heading “Stock Repurchase Program” for more information regarding stock purchases.
None.
Not applicable.
None of the Company's directors and officers adopted, modified or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the Company's fiscal quarter ended March 31, 2026 (each as defined in Item 408 of Regulation S-K under the Securities Exchange Act of 1934, as amended).
59
The exhibits required by Item 601 of Regulation S-K and filed herewith are listed in the Exhibit Index that precedes the Signature Page and the exhibits filed.
Exhibit Index to Quarterly Report on Form 10-Q Description and Filing or Incorporation Reference
10.1
Tenth Amendment to the Sixth Amended and Restated Credit Agreement, entered into as of February 19, 2026, between the Company and The Northern Trust Company.
Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on February 20, 2026
31.1
Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002
(Filed herewith)
31.2
32.1
Certification pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002
32.2
101.INS
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document
101.SCH
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents
104
Cover page formatted as Inline XBRL and contained in Exhibits 101
60
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
FIRST MID BANCSHARES, INC.
(Registrant)
Date: May 8, 2026
/s/ Joseph R. Dively
Joseph R. Dively
Chief Executive Officer
/s/ Jordan D. Read
Jordan D. Read
Chief Financial and Risk Officer