ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis are intended to provide a better understanding of the consolidated financial condition and results of operations of the Company and its subsidiaries for the years ended December 31, 2025, 2024, and 2023. 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.
Forward-Looking Statements
This report may contain certain forward-looking statements, 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,” ”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 those described in Item 1A. “Risk Factors” and other sections of the Company’s Annual Report on Form 10-K and the Company’s other filings with the SEC, and changes in interest rates, general economic conditions and those in the Company’s market area, legislative/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 loan or investment portfolios and the valuation of the investment portfolio, the Company’s success in raising capital, demand for loan products, deposit flows, competition, demand for financial services in the Company’s market area and accounting principles, policies and guidelines. Furthermore, 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, we do not undertake any obligation to update or review any forward-looking information, whether as a result of new information, future events or otherwise.
For the Years Ended December 31, 2025, 2024, and 2023 Overview
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 $91.7 million, $78.9 million, and $68.9 million and diluted earnings per share were $3.83, $3.30, and $3.15 for the years ended December 31, 2025, 2024, and 2023, respectively. The following table shows the Company’s annualized performance ratios for the years ended December 31, 2025, 2024, and 2023:
Return on average assets
Return on average common equity
Average common equity to average assets (non-GAAP)
Total assets at December 31, 2025, 2024, and 2023 were $7.97 billion, $7.52 billion, and $7.59 billion, respectively. Net loan balances increased to $5.94 billion at December 31, 2025, from $5.60 billion at December 31, 2024, and from $5.51 billion at December 31, 2023. The increase in 2025 was primarily due to organic growth within the established footprint.
Total deposit balances increased to $6.40 billion at December 31, 2025 from $6.06 billion at December 31, 2024 which was a decrease from $6.12 billion at December 31, 2023. The increase in 2025 was primarily due to an increase in CD's, brokered CDs, and non-interest bearing deposits.
The decrease in 2024 was due primarily to a reduction in brokered CDs and purchased CDs as part of the Company's strategy to reduce its cost of funds.
Net interest margin (tax effected), defined as net interest income divided by average interest-earning assets, was 3.70% for 2025, 3.34% for 2024 and 3.05% for 2023. The increase in 2025 was primarily due to the continued efforts on improving loan yields for new and renewed loans, continued efforts to increase the performance of the investment portfolio, and a decrease in funding costs. The increase in 2024 was primarily due to efforts on improving loan yields for new and renewed loans.
Net interest income increased to $256.2 million in 2025 from $228.7 million in 2024 and $193.5 million in 2023. During 2025 and 2024, the increase in net interest income was primarily due to the previously mentioned explanation for the increase in net interest margin (tax effected).
Non-interest income decreased and increased, respectively, to $93.1 million in 2025 compared to $96.3 million in 2024 and $86.8 million in 2023. The decrease in 2025 was primarily due to the losses recognized on the sale of low performing securities in the investment portfolio. The increase in 2024 was primarily due to the Blackhawk Bank acquisition being present for a full calendar year and the increase in insurance commissions due to the acquisition of Mid Rivers Insurance Group in 2024.
Non-interest expenses increased to $222.2 million in 2025 compared to $215.0 million in 2024, and $185.7 million in 2023. The increase in 2025 was primarily due to the increase in incentive compensation related to over performance of budgeted financial metrics partially offset by gains on the sale of buildings as part of a branch optimization project that reduced in other expenses. The increase in 2024 is primarily due to increased employees and locations from the Blackhawk Bank acquisition being present for a full calendar year.
Following is a summary of the factors that contributed to the changes in net income (in thousands):
Net interest income
Provision for credit losses
Other income, including securities transactions
Other expenses
Income taxes
Increase (decrease) in net income
Credit quality is an area of importance to the Company. Year-end total nonperforming loans were $31.9 million at December 31, 2025 compared to $29.8 million at December 31, 2024, and $20.1 million at December 31, 2023. Repossessed Assets balances totaled $2.9 million at December 31, 2025 compared to $2.7 million at December 31, 2024, and $1.2 million at December 31, 2023. The Company’s provision for credit losses was $9.9 million for 2025, compared to $5.6 million for 2024, and $6.1 million for 2023. The increase in provision expense for 2025 was expected as the industry returns to a normal credit cycle. The decrease of provision expense in 2024 was primarily due to the provision requirements in 2023 for the acquisition of Blackhawk Bank.
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 ratio to risk weighted assets ratio at December 31, 2025, 2024, and 2023 was 13.55%, 12.82%, and 12.02%, respectively. The Company’s total capital to risk weighted assets ratio at December 31, 2025, 2024, and 2023 was 15.67%, 15.37% and 14.84%, respectively. The increases in 2025 and 2024 were primarily due to net income of the Company exceeding dividends paid to shareholders.
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 enters 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 December 31, 2025, 2024, and 2023 were $1.4 billion, $1.4 billion, and $1.3 billion, respectively. See Note 17 – “Commitments and Contingent Liabilities” herein for further information.
Critical Accounting Policies and Use of Significant Estimates
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 of the Company are described in the footnotes to the consolidated financial statements. Certain accounting policies involve significant judgments and assumptions by management that have a material impact on the carrying value of certain assets and liabilities; management considers such accounting policies to be critical accounting policies. The judgments and assumptions used by management are based on historical experience and other factors, which are believed to be reasonable under the circumstances. Because of the nature of the judgments and assumptions made by management, actual results could differ from these judgments and assumptions, which could have a material impact on the carrying values of assets and liabilities and the results of operations of the Company.
Allowance for Credit Losses - Loans. The Company believes the allowance for credit losses for loans is the critical accounting policy that requires the most significant judgments and assumptions used in the preparation of its consolidated financial statements. The allowance for credit losses is a valuation account to adjust the cost basis to the amount expected to be collected, based on the Company's loss experience, current conditions, and reasonable and supportable forecasts. It represents the best estimate of losses inherent in the existing loan portfolio. An estimate of potential losses inherent in the loan portfolio are determined and an allowance for those losses is established by considering factors including loan loss experience, expected cash flows and estimated collateral values. In assessing these factors, the Company uses relevant available information, from internal and external sources, relating to, current conditions and reasonable and supportable forecasts.
In order to determine the allowance for credit losses, the portfolio is segregated into pools for not individually evaluated loans that share similar risk characteristics. The Company's credit loss experience provides the basis for the estimate of expected credit losses. Adjustments to this experience are made for relevant factors to each pool including merger and acquisition activity, economic conditions, changes in policies, procedures and underwriting, and concentrations. The Company estimates the appropriate level of allowance for credit losses for individually evaluated loans by evaluating them separately. A specific allowance is assigned to a loan when expected cash flows or collateral are less than the carrying amount of the loan.
Income Taxes. The Company is subject to the federal income tax laws of the United States, and the tax laws of the states and other jurisdictions where we conduct business. Due to the complexity of these laws, taxpayers and the taxing authorities may subject these laws to different interpretations. Management must make conclusions and estimates about the application of these innately intricate laws, related regulations, and case law. When preparing the Company’s income tax returns, management attempts to make reasonable interpretations of the tax laws. Taxing authorities have the ability to challenge management’s analysis of the tax law or any reinterpretation management makes in its ongoing assessment of facts and the developing case law. Management assesses the reasonableness of its effective tax rate quarterly based on its current estimate of net income and the applicable taxes expected for the full year. On a quarterly basis, management also reviews circumstances and developments in tax law affecting the reasonableness of deferred tax assets and liabilities and reserves for contingent tax liabilities.
Results of Operations
Net Interest Income
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.
Net interest income is the excess of interest received from earning assets over interest paid on interest-bearing liabilities. 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% was used for all years. 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 $3.1 million, $3.1 million, and $3.1 million for 2025, 2024, and 2023, respectively, were 3.65%, 3.28%, and 3.00% at December 31, 2025, 2024, and 2023, 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 in the following table (dollars in thousands):
Year Ended
Year Ended
Year Ended
December 31, 2025
December 31, 2024
December 31, 2023
Average
Average
Average
Average
Average
Average
Balance
Interest
Rate
Balance
Interest
Rate
Balance
Interest
Rate
Assets
Interest-bearing deposits
Federal funds sold
Certificates of deposit investments
Investment securities (1)
Loans (TE)(1)(2)(3)
Total earning assets
Other nonearning assets
Allowance for credit losses
Total assets
Liabilities and stockholders' equity
Deposits:
Demand deposits, interest-bearing
Savings deposits
Time deposits
Total interest-bearing deposits
Securities sold under agreements to repurchase
FHLB advances
Federal funds purchased
Subordinated debt
Junior subordinated debentures
Other debt
Total borrowings
Total interest-bearing liabilities
Demand deposits
Other liabilities
Stockholders’ equity
Total liabilities and stockholders' equity
Net interest income
Net interest spread
TE net yield on interest-earning assets
Tax-exempt income is shown on a fully tax equivalent basis.
Nonaccrual loans have been included in the average balances. Balances are net of unaccreted discount related to loans acquired.
Includes loans held for sale
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 past two years (in thousands):
2025 Compared to 2024
2024 Compared to 2023
Increase (Decrease)
Increase (Decrease)
Total
Total
Change
Volume (1)
Rate (1)
Change
Volume (1)
Rate (1)
Earning assets:
Interest-bearing deposits
Federal funds sold
Certificates of deposit investments
Investment securities (1)
Loans (2)
Total interest income
Interest-bearing liabilities:
Deposits:
Demand deposits, interest-bearing
Savings deposits
Time deposits
Total interest-bearing deposits
Securities sold under agreements to repurchase
FHLB advances
Federal funds purchased
Subordinated debt
Junior subordinated debentures
Other debt
Total borrowings
Total interest expense
Net interest income
Changes attributable to the combined impact of volume and rate have been allocated proportionately to the change due to volume and the change due to rate.
Nonaccrual loans have been included in the average balances. Balances are net of unaccreted discount related to loans acquired.
Net interest income on a tax-effected basis increased $27.5 million or 11.8% in 2025 compared to an increase of $35.3 million or 17.9% in 2024. Net interest income on a tax-effected basis and tax effected net interest margin increased primarily due to the continued focus on loan yields for new and renewed loans, continued efforts to increase the performance of the investment portfolio, and a decrease in funding costs.
In 2025, average earning assets increased by $154.3 million, or 2.2%, and average interest-bearing liabilities increased by $46.4 million or 0.9%. These increases were primarily due to organic growth.
Provision for Credit Losses
The provision for credit losses in 2025 was $9.9 million compared to $5.6 million in 2024 and $6.1 million in 2023. Nonperforming loans increased to $31.9 million at December 31, 2025 from $29.8 million at December 31, 2024 and $20.1 million at December 31, 2023. The increase in provision expense in 2025 was expected as the industry returns to a normal credit cycle. The decrease in provision expense in 2024 was primarily due to the required provision in 2023 tied to the Blackhawk Bank acquisition. Net charge-offs were $5.2 million during 2025, $4.1 million during 2024 and $0.3 million during 2023. 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.
Other Income
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 last three years (dollars in thousands):
Change From Prior Year
Wealth management revenues
Insurance commissions
Service charges
Securities gains (losses), net
Mortgage banking, net
ATM / debit card revenue
Bank owned life insurance
Other income
Total other income
Total non-interest income decreased and increased, respectively, to $93.1 million in 2025 compared to $96.3 million in 2024 and $86.8 million in 2023. The primary reasons for the more significant year-to-year changes in other income components are as follows:
Wealth management revenues increased in 2024 primarily due to growth in net brokerage fees and trust management fees. Total assets under management were $6.6 billion at December 31, 2025 compared to $6.4 billion at December 31, 2024 and $6.1 billion at December 31, 2023.
Insurance commissions increased in 2025 primarily due to Mid Rivers Insurance Group Inc. acquisition being present the entire calendar year and the acquisition of part of AAdvantage Insurance Group LLC's book of business in July 2025 accompanied by organic growth. The increase in 2024 was primarily due the acquisition of Mid Rivers Insurance Group and Purdum, Gray, Ingledue, Beck Inc. Insurance being present the entire calendar year.
Fees from service charges increased in 2024 primarily due to Blackhawk Bank being present the entire calendar year.
Net securities losses in 2025 were $2.5 million compared to losses of $433,000 in 2024 and gains $3.4 million in 2023. The losses in 2025 and 2024 were due to management's efforts to improve earning asset yields through the sales of low-yielding bonds.
The increase in mortgage banking income during 2024 was primarily due to Blackhawk Bank being present the entire calendar year.
Revenue from ATMs and debit cards increased in 2024 primarily due to Blackhawk Bank being present the entire calendar year.
Other income decreased during 2025 primarily due to the repurchase of subordinated debt resulting in a gain in 2024 instead of a loss in 2025, recognition of contingent income accrued by Blackhawk Bank prior to their acquisition in 2024, and gains on the sale of fixed assets being presented in other income in 2024 compared to other expenses in 2025. Other income increased during 2024 primarily due to Blackhawk Bank being present the entire calendar year.
Other Expense
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 last three years (dollars in thousands):
Change From Prior Year
Salaries and employee benefits
Net occupancy and equipment expense
Net other real estate owned expense
FDIC insurance expense
Amortization of other intangible assets
Stationery and supplies
Legal and professional
Marketing and donations
ATM / debit card expense
Other expense
Total other expense
Total non-interest expense increased to $222.2 million in 2025 from $215.0 million in 2024 and $185.7 million in 2023. The primary reasons for the more significant year-to-year changes in other expense components are as follows:
Salaries and employee benefits, the largest component of other expense, increased in 2025, which was primarily due to an increase in incentive compensation for exceeding budgeted financial metrics, increases for merit raises and applicable payroll taxes, and an increase in employee group insurance expense. The increase in 2024 was primarily due to former Blackhawk Bank employees being present the entire calendar year, increase in
incentive compensation, share based compensation, merit increases and applicable payroll taxes. There were 1,170 full-time equivalent employees at December 31, 2025, compared to 1,198 at December 31, 2024, and 1,187 at December 31, 2023.
Occupancy and equipment expense increase in 2025 was primarily due to the presentation of telecommunication expense in this category in 2025 compared to other expenses in 2024 and nonrecurring expense related to technology projects. The increase in 2024 was primarily due to additional properties added in the acquisition of Blackhawk Bank being present the entire calendar year.
Net other real estate owned expense decreased in 2024 primarily due to the large expenses occurring in 2023.
Amortization of other intangibles decreased in 2025 as expected due to the scheduled amortization of previously acquired intangible assets. The increase during 2024 was primarily due to additional core deposit intangibles added from the acquisition of Blackhawk Bank being present the entire calendar year.
Legal and professional expense decreased in 2025 primarily due to a decrease in the nonrecurring expenses present in 2024. The increase in 2024 was due to nonrecurring expenses associated with technology investment upgrades.
ATM and debit card expenses increased during 2024 primarily due to an increase in electronic transactions following the acquisition of Blackhawk Bank being present the entire calendar year.
Other operating expenses decreased in 2024 primarily due to the majority of acquisition costs associated with Blackhawk Bank occurring in 2023. The decrease in 2024 was primarily due to the above mentioned gains on the sale of fixed assets being presented in other income in 2024 compared to other expenses in 2025 and the above mentioned presentation of telecommunication expenses in this category in 2025 compared to other expenses in 2024.
Income Taxes
Income tax expense amounted to $25.3 million in 2025 compared to $25.5 million in 2024, and $19.5 million in 2023. Effective tax rates were 21.6% for 2025, 24.5% for 2024, and 22.0% for 2023. The Company files U.S. federal and state of Florida, Illinois, Indiana, Missouri, Texas, and Wisconsin income tax returns.
Analysis of Consolidated Balance Sheets
Securities
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 for the last three years (dollars in thousands):
December 31,
Weighted
Weighted
Weighted
Amortized
Average
Amortized
Average
Amortized
Average
Cost
Yield
Cost
Yield
Cost
Yield
U.S. Treasury securities and obligations of U.S. government corporations and agencies
Obligations of states and political subdivisions
Mortgage-backed securities (1)
Other securities
Total securities
(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.
At December 31, 2025, the amortized cost of the Company’s investment portfolio decreased by $41.6 million from December 31, 2024 primarily due to calls, maturities, paydowns, and sales of securities partially offset by purchases designed to raise the rate of return of the portfolio. The decrease in 2024 was for the same previously mentioned reason as 2025. 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 December 31, 2025 for certain investment securities (in thousands):
Average Credit Rating of Fair Value at December 31, 2025 (1)
Amortized
Estimated
Not
Cost
Fair Value
AAA
BBB +/-
< BBB -
Rated
Available-for-sale:
U.S. Treasury securities and obligations of U.S. government corporations and agencies
Obligations of state and political subdivisions
Mortgage-backed securities (2)
Corporate bonded debt
Total available-for-sale
Held-to-maturity:
Other securities
Equity securities:
Federal Agricultural Mtg Corp
Midwest Independent BankersBank
Equalized Community Development Fund
Total Equity
(1) Credit ratings reflect the lowest current rating assigned by a nationally recognized credit rating agency.
(2) 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. While MBS and CMOs are no longer explicitly rated by credit rating agencies, the industry recognizes that they are backed by agencies which have an implied government guarantee.
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 December 31, 2025 and the weighted average yield for each range of maturities (dollars in thousands):
One
After 1
After 5
year or
through
through
After
less
5 years
10 years
ten years
Total
Available-for-sale:
U.S. Treasury securities and obligations of U.S. government corporations and agencies
Obligations of state and political subdivisions
Mortgage-backed securities (1)
Corporate bonded debt
Total available-for-sale
Weighted average yield
Full tax equivalent yield
Held-to-maturity:
Other securities
Total held-to-maturity
Weighted average yield
Full tax equivalent yield
(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 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 December 31, 2025. Investment securities carried at approximately $474 million and $633 million at December 31, 2025 and 2024, respectively, were pledged to secure public deposits and repurchase agreements and for other purposes as permitted or required by law.
Loans
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, for the last five years (dollars in thousands):
Outstanding
Loans %
Construction and land development
Agricultural real estate
1-4 family residential properties
Multifamily residential properties
Commercial real estate
Loans secured by real estate
Agricultural loans
Commercial and industrial loans
Consumer loans
All other loans
Total loans
Loan balances increased by $338.9 million or 6.0% from December 31, 2024 to December 31, 2025. Loan balances increased by $91.9 million or 1.6% from December 31, 2023 to December 31, 2024. The balances of loans sold into the secondary market were $167.6 million in 2025 compared to $125.3 million in 2024. The balance of real estate loans held for sale, included in the balances shown above, amounted to $5.2 million and $6.6 million as of December 31, 2025 and 2024, 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 does not have a concentration, as defined by the regulatory agencies, in construction and land development loans or commercial real estate loans as a percentage of total risk-based capital for the periods shown above. At December 31, 2025 and 2024, First Mid Bank did have industry loan concentrations in excess of 25% of total risk-based capital in the following industries (dollars in thousands):
December 31, 2025
December 31, 2024
Principal
% Outstanding
Principal
% Outstanding
balance
Loans
balance
Loans
Other grain farming
Lessors of non-residential buildings
Lessors of residential buildings and dwellings
Hotels and motels
The Company had no further industry loan concentrations in excess of 25% of total risk-based capital.
The following table presents the balance of loans outstanding as of December 31, 2025, by contractual maturities (in thousands):
Maturity (1)
One year
or less(2)
Over 1 through
5 years
Over
5 years
Total
Construction and land development
Agricultural real estate
1-4 family residential properties
Multifamily residential properties
Commercial real estate
Loans secured by real estate
Agricultural loans
Commercial and industrial loans
Consumer loans
All other loans
Total loans
Based upon remaining contractual maturity.
Includes demand loans, past due loans and overdrafts.
As of December 31, 2025, loans with maturities over one year consisted of approximately $2.5 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 and Nonperforming Other Assets
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 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 income. Subsequent receipts on non-accrual 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 (dollars in thousands):
December 31,
Nonaccrual loans
Modified loans which are performing in accordance with revised terms
Total nonperforming loans
Repossessed assets
Total nonperforming loans and repossessed assets
Nonperforming loans to loans, before allowance for credit losses
Nonperforming loans and repossessed assets to loans, before allowance for credit losses
The $2.3 million increase in nonaccrual loans during 2025 resulted from the net of $20.3 million of loans put on nonaccrual status, offset by no loans transferred to other real estate owned, $4.9 million of loans charged off and $13.1 million of loans becoming current or paid-off.
The following table summarizes the composition of nonaccrual loans (dollars in thousands):
December 31, 2025
December 31, 2024
Balance
% of Total
Balance
% of Total
Construction and land development
Agricultural real estate
1-4 family residential properties
Multifamily residential properties
Commercial real estate
Loans secured by real estate
Agricultural loans
Commercial and industrial loans
Consumer loans
All other loans
Total loans
Interest income that would have been reported if nonaccrual and restructured loans had been performing totaled $1.2 million, $1.4 million and $412,000 for the years ended December 31, 2025, 2024, and 2023, respectively.
The $137,000 increase in repossessed assets during 2025 resulted from the net of $2.0 million of additional assets repossessed, $1.5 million of repossessed assets sold, $377,000 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):
December 31, 2025
December 31, 2024
Balance
% of Total
Balance
% of Total
Construction and land development
1-4 family residential properties
Commercial real estate
Total real estate
Consumer loans
Total repossessed collateral
Repossessed assets sold during 2025 resulted in net gains of $52,000 related to real estate asset sales and $1,000 of net gains related to other assets sales. The Company also recognized no deferred gains, recorded $377,000 of write-downs on three real estate properties owned, and recorded no change in fair market value discount.
Loan Quality and Allowance for Credit Losses
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 , the level and composition of nonaccrual, past due and 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, 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. The Company’s operations (and therefore its loans) are concentrated in central Illinois, an area where agriculture is the dominant industry. Accordingly, lending and other business relationships with agriculture-based businesses are critical to the Company’s success. At December 31, 2025, the Company’s loan portfolio included $681.4 million of loans to borrowers whose businesses are directly related to agriculture. Of this amount, $577.9 million was concentrated in other grain farming. Total loans to borrowers whose businesses are directly related to agriculture increased $50.9 million from $630.6 million at December 31, 2024 while loans concentrated in other grain farming increased $70.3 million from $507.6 million at December 31, 2024. 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 $1.1 billion of loans to lessors of non-residential buildings, $225.6 million of loans concentrated in hotels and motels, and $641.8 million of 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 a 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 for the past five years and of changes in the allowance for these periods is summarized as follows (dollars in thousands):
Average loans outstanding, net of unearned income
Allowance-beginning of period
Initial allowance on loans purchased with credit deterioration
Charge-offs:
Construction and land development
1-4 family residential properties
Commercial real estate
Agricultural loans
Commercial and industrial loans
Consumer loans
Total charge-offs
Recoveries:
Construction and land development
Agricultural real estate
1-4 family residential properties
Commercial real estate
Agricultural loans
Commercial and industrial loans
Consumer loans
Total recoveries
Net charge-offs
Provision for credit losses
Allowance-end of period
Ratio of annualized net charge-offs to average loans
Ratio of allowance for credit losses to loans outstanding (less unearned interest at end of period)
Ratio of allowance for credit losses to nonperforming loans
The ratio of the allowance for credit losses to nonperforming loans was 234.4% as of December 31, 2025 compared to 235.2% as of December 31, 2024. The decrease in this ratio is primarily due to an increase in nonperforming loans. Management believes that the overall estimate of the allowance for credit losses appropriately accounts for probable losses attributable to current exposures.
During 2025, the Company had net charge-offs of $5.2 million compared to $4.1 million in 2024. During 2025, there were significant charge-offs of two commercial real estate loans to two borrowers of $1 million, one construction and land development loan to one borrower of $107,000, nine agricultural operating loans to eight borrowers of $1.8 million, and ten commercial operating loans to eight borrowers of $2.3 million. During 2024, there were significant charge-offs of two commercial real estate loans to two borrowers of $451,000, one agricultural operating loan to one borrower of $2.1 million, and a significant charge-off of one commercial operating loan to one borrower of $466,000.
At December 31, 2025, the allowance for credit losses amounted to $74.9 million or 1.25% of total loans. At December 31, 2024, the allowance for credit losses amounted to $70.2 million or 1.24% of total loans.
The allowance for credit losses, in management's judgment, was allocated as follows to cover probable credit losses (dollars in thousands):
December 31, 2025
December 31, 2024
December 31, 2023
% of loans to
% of loans to
% of loans to
Allowance for
credit losses
total
loans
Allowance for
credit losses
total
loans
Allowance for
credit losses
total
loans
Construction and land development
Agriculture real estate
1-4 family residential
Commercial real estate
Agricultural loans
Commercial and industrial
Consumer
Allowance at end of year
December 31, 2022
December 31, 2021
% of loans to
% of loans to
Allowance for
credit losses
total
loans
Allowance for
credit losses
total
loans
Construction and land development
Agriculture real estate
1-4 family residential
Commercial real estate
Agricultural loans
Commercial and industrial
Consumer
Allowance at end of year
Deposits
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 years ended December 31, 2025, 2024, and 2023 (dollars in thousands):
Average
Balance
Weighted
Average
Rate
Average
Balance
Weighted
Average
Rate
Average
Balance
Weighted
Average
Rate
Demand deposits:
Non-interest-bearing
Interest-bearing
Savings
Time deposits
Total average deposits
As of December 31, 2025, 2024, and 2023, the Company held $1.7 billion, $1.6 billion, and $1.7 billion, respectively, of uninsured deposits for customers.
The following table sets forth the high and low month-end balances for the years ended December 31, 2025, 2024, and 2023 (in thousands):
High month-end balances of total deposits
Low month-end balances of total deposits
In 2025, the average balance of deposits increased by $50.8 million from 2024. The increase in 2025 was primarily due to an increase in time deposits through organic growth and use of brokered CDs. The increase in 2024 was primarily due to deposits added in the acquisition of Blackhawk Bank being present the entire calendar year.
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 (in thousands):
December 31,
Three months or less
Over three months through twelve months
Over one year through three years
Over three years
Total
The balance of time deposits of more than $250,000 increased $78.7 million from December 31, 2024 to December 31, 2025. The increase was primarily attributable to a combination of higher wholesale deposit balances and targeted internal marketing efforts, implemented to attract new time deposit funding to support the Company's liquidity needs. The balance of time deposits of more than $250,000 decreased $30.1 million from December 31, 2023 to December 31, 2024. The decrease was primarily due to intentional efforts to lower funding costs by reducing non-relationship time deports.
In 2025 the Company maintained account relationships with various public entities throughout its market areas. These public entities had total balances of $193.6 million and $261.2 million in various checking accounts and time deposits as of December 31, 2025 and 2024, respectively. These balances are subject to change depending upon the cash flow needs of the public entity.
Repurchase Agreements and Other Borrowings
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 its 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 December 31, 2025, 2024, and 2023 is presented below (dollars in thousands):
Securities sold under agreements to repurchase
Federal Home Loan Bank advances:
FHLB-overnight
Fixed term – due in one year or less
Fixed term – due after one year
Other borrowings:
Federal funds purchased
Debt due in one year or less
Subordinated debt
Junior subordinated debentures
Total
Average interest rate at end of period
Maximum outstanding at any month-end:
Securities sold under agreements to repurchase
Federal Home Loan Bank advances:
FHLB-overnight
Fixed term – due in one year or less
Fixed term – due after one year
Other borrowings:
Federal funds purchased
Debt due in one year or less
Subordinated debt
Junior subordinated debentures
Averages for the period (YTD):
Securities sold under agreements to repurchase
Federal Home Loan Bank advances:
FHLB-overnight
Fixed term – due in one year or less
Fixed term – due after one year
Other borrowings:
Federal funds purchased
Loans due in one year or less
Subordinated debt
Junior subordinated debentures
Total
Average interest rate during the period
Securities sold under agreements to repurchase decreased $7.4 million during 2025 primarily due to the seasonal demands in balances and change in cash flow needs of various customers. FHLB advances represent borrowings by the First Mid Bank to economically fund loan demand. At December 31, 2025, FHLB advances totaled $270.0 million with a weighted-average interest rate of 3.44% and maturities from June 2026 to March 2035. At December 31, 2024, FHLB advances totaled $242.4 million with a weighted-average interest rate of 3.97% and maturities from March 2025 to December 2029.
The Company is party to a revolving credit agreement with The Northern Trust Company in the amount of $15 million. The balance on this line of credit was $0 as of December 31, 2025. This loan was renewed on April 4, 2025 for one year as a revolving credit agreement with a maximum available balance of $15 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 December 31, 2025 and 2024.
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 December 31, 2025 and 2024, 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 December 31, 2025, $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 December 31, 2025, $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 December 31, 2025, $500,000 in aggregate principal amount of Blackhawk Subordinated Debt II Notes remain 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 June 15, 2011 and then converted to floating rate (SOFR plus 160 basis points) after June 15, 2011 (5.59% and 6.81% at December 31, 2025 and 2024, 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 2025, bear interest at three-month SOFR plus 185 basis points (5.84% and 7.06% at December 31, 2025 and 2024, respectively) and resets 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 (5.69% and 6.91% at December 31, 2025 and 2024, respectively) and resets 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 of 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 (7.20% and 8.17% at December 31, 2025 and 2024, respectively) and resets 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 (6.02% and 7.25% at December 31, 2025 and 2024, respectively) and resets quarterly.
The trust preferred securities issued by Trust II, CLST I, FBTCST I, BHST I, and BHST II 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 or First Mid Bank.
Interest Rate Sensitivity
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 December 31, 2025 (dollars in thousands):
Rate Sensitive Within
1 year
1-3 years
3-5 years
Thereafter
Total
Fair Value
Interest-earning assets:
Federal funds sold and other interest-bearing deposits
Certificates of deposit investments
Taxable investment securities
Nontaxable investment securities
Loans
Total
Interest-bearing liabilities:
Savings and NOW accounts
Money market accounts
Other time deposits
Short-term borrowings/debt
Long-term borrowings/debt
Total
Rate sensitive assets – rate sensitive liabilities
Cumulative GAP
Cumulative amounts as % of total rate sensitive assets
Cumulative ratio
The static GAP analysis shows that at December 31, 2025, 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 the 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’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.
Capital Resources
At December 31, 2025, the Company’s stockholders' equity had increased approximately $112.3 million, or 13.3%, to $958.7 million from $846.4 million as of December 31, 2024. During 2025, net income contributed $91.7 million to equity before the payment of dividends to stockholders of $23.4 million. The change in market value of available-for-sale investment securities increased stockholders' equity by $41.1 million, net of tax.
Stock Plans
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 December 31, 2025, the Company classified the cost basis of its common stock issued and held in trust in connection with the DCP of approximately $6.8 million as treasury stock. The Company also classified the cost basis of its related deferred compensation obligation of approximately $6.8 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 2025, 2024, and 2023, the Company awarded 84,097 and 80,332, and 45,986 shares as stock and stock unit awards, respectively. This SI Plan is more fully described in Note 13 - Stock Incentive Plan.
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 2025, the Company did not repurchase any shares. As of December 31, 2025, the Company had approximately 1.2 million shares or approximately $46.8 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. As of December 31, 2025, 2024, and 2023, 29,313, 32,936, and 38,989 shares, respectively were issued pursuant to ESPP. As of December 31, 2025, there were 444,023 shares unassigned but available to be issued under the ESPP.
Capital Ratios
For 2025, the minimum regulatory ratios required for minimum capital adequacy purposes plus the capital buffer are 10.5% for the Total Risk-based capital ratio, 8.5% for the Tier 1 Risk-based capital ratio, 7.0% for the Common Equity Tier 1 capital ratio, and 4.0% for the Tier 1 Leverage ratio. The Company and First Mid Bank have capital ratios above the minimum regulatory capital requirements and, as of December 31, 2025, the Company and First Mid Bank had capital ratios above the levels required for categorization as well-capitalized under the capital adequacy guidelines established by the bank regulatory agencies. A tabulation of the Company and First Mid Bank's capital ratios as of December 31, 2025 follows:
Total Risk-
based
Capital Ratio
Tier 1
Risk-based
Capital Ratio
Common Equity
Tier 1 Capital
Ratio
Tier One Leverage Ratio (Capital to Average Assets)
First Mid Bancshares, Inc. (Consolidated)
First Mid Bank
Liquidity
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 the Company’s operating line of credit with The Northern Trust Company. Details for these sources include:
First Mid Bank has $130 million available in overnight federal fund lines, including $30 million from First Horizon Bank, N.A., $25 million from Zions Bank, $20 million from U.S. Bank, N.A., $20 million from BMO Bank, N.A., $20 million from Bankers' Bank., and $15 million from The Northern Trust Company. Availability of the funds is subject to First Mid Bank meeting minimum regulatory capital requirements for total capital to risk-weighted assets and Tier 1 capital to total average assets. As of December 31, 2025, First Mid Bank met these regulatory requirements.
First Mid Bank can borrow from the Federal Home Loan Bank as a source of liquidity. Availability of the funds is subject to the pledging of collateral to the Federal Home Loan Bank. Collateral that is pledged includes one-to-four family residential real estate loans, commercial real estate loans, multi-family loans, and farmland. At December 31, 2025, the excess collateral at the FHLB would support approximately $1.6 billion of additional advances for First Mid Bank.
First Mid Bank is a member of the Federal Reserve System and can borrow funds provided that sufficient collateral is pledged.
First Mid Bank has received formal approval from the Federal Reserve Bank and can participate in the Borrower-in-Custody (BIC) program. As a result, the Bank can pledge loans as collateral at the Federal Reserve Bank's Discount Window while retaining custody of the pledged loans. The program enhanced our contingent liquidity position by approximately $316.0 million as of December 31, 2025.
In addition, as of December 31, 2025, the Company had a revolving credit agreement in the amount of $15 million with The Northern Trust Company with an outstanding balance of $0 and $15 million in available funds. This loan was renewed on April 4, 2025 for one year as a revolving credit agreement. The interest rate is floating at 2.25% over the federal funds rate. The loan is unsecured. The Company and its subsidiary banks were in compliance with the existing covenants at December 31, 2025 and 2024.
Management continues to monitor its expected liquidity requirements carefully, focusing primarily on cash flows from:
lending activities, including loan commitments, letters of credit and mortgage prepayment assumptions;
deposit activities, including seasonal demand of private and public funds;
investing activities, including prepayments of mortgage-backed securities and call provisions on U.S. Treasury and government agency securities; and
operating activities, including scheduled debt repayments and dividends to stockholders.
The following table summarizes significant contractual obligations and other commitments at December 31, 2025 (in thousands):
Total
Less than
1 year
1-3 years
3-5 years
More than
5 years
Time deposits
Debt
Other borrowings
Operating leases
Supplemental retirement
For the year ended December 31, 2025, net cash of $130.9 million was provided from operating activities, $302.6 million was used in investing activities, and $305.5 million was provided by financing activities. In total cash and cash equivalents increased by $133.7 million from year-end 2024.
For the year ended December 31, 2024, net cash of $124.4 million was provided from operating activities, $7.5 million was used in investing activities, and $138.8 million was used in financing activities. In total cash and cash equivalents decreased by $21.8 million from year-end 2023.
For the year ended December 31, 2023, net cash of $72.4 million was provided from operating activities, $474.4 million was provided from investing activities, and $556.2 million was used in financing activities. In total cash and cash equivalents decreased by $9.4 million from year-end 2022.
Effects of Inflation
Unlike industrial companies, virtually all of the assets and liabilities of the Company are monetary in nature. As a result, interest rates have a more significant impact on the Company’s performance than the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or experience the same magnitude of changes as goods and services, since such prices are affected by inflation. In the current economic environment, liquidity and interest rate adjustments are features of the Company’s assets and liabilities that are important to the maintenance of acceptable performance levels. The Company attempts to maintain a balance between monetary assets and monetary liabilities, over time, to offset these potential effects.
ITEM 7A. QUANTITATIVE AND QUALITAT IVE DISCLOSURES ABOUT MARKET RISK
The Company’s market risk arises primarily from interest rate risk inherent in its lending, investing and deposit taking activities, which are restricted to First Mid Bank. For a discussion of how management of the Company addresses and evaluates interest rate risk see also “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Interest Rate Sensitivity.”
Based on the financial analysis performed as of December 31, 2025, which considers how the specific interest rate scenario would be expected to impact each interest-earning asset and each interest-bearing liability, the Company estimates that changes in the prime interest rate would impact First Mid Bank's performance, on a consolidated basis, as follows:
Increase (Decrease) In
December 31, 2025
Net Interest Income
Return On
Average Equity
Prime rate is 6.75%
Prime rate increase of:
200 basis points to 8.75%
100 basis points to 7.75%
Prime rate decrease of:
100 basis points to 5.75%
200 basis points to 4.75%
The following table shows the same analysis for First Mid Bank performance as of December 31, 2024:
Increase (Decrease) In
December 31, 2024
Net Interest Income
Return On
Average Equity
Prime rate is 7.50%
Prime rate increase of:
200 basis points to 9.50%
100 basis points to 8.50%
Prime rate decrease of:
100 basis points to 6.50%
200 basis points to 5.50%
The Company's Board of Directors has adopted an interest rate risk policy that establishes maximum decreases in the percentage change in net interest income of 5% in a 100 basis point rate shift and 10% in a 200 basis point rate shift. No assurance can be given that the actual net interest income would increase or decrease by such amounts in response to a 100 or 200 basis point increase or decrease in the prime rate because it is also affected by many other factors. The results above are based on one-time “shock” moves and ramped rate increases and do not take into account any management response or mitigating action.
Interest rate sensitivity analysis is also used to measure the Company’s interest risk by computing estimated changes in the Economic Value of Equity (“EVE”) of the First Mid Bank under various interest rate shocks. EVE is determined by calculating the net present value of each asset and liability category by rate shock. The net differential between assets and liabilities is the EVE. EVE is an expression of the long-term interest rate risk in the balance sheet as a whole.
The following table presents the Company's projected change in EVE, on a consolidated basis, for the various rate shock levels at December 31, 2025 and 2024 (in thousands). All market risk sensitive instruments presented in the tables are held-to-maturity or available-for-sale. The Bank has no trading securities.
Changes In
Economic Value of Equity
Interest Rates
(basis points)
Amount of Change
Percent of Change (%)
December 31, 2025
December 31, 2024
As indicated above, at December 31, 2025, in the event of a sudden and sustained increase in prevailing market interest rates, the EVE would be expected to decrease if rates increased 100 or 200 basis points. In the event of a sudden and sustained decrease in prevailing market interest rates, the Company's EVE would be expected to increase. At December 31, 2025, the estimated changes in EVE were inside the Company’s policy guidelines that normally allow for a change in capital of +/-10% from the base case scenario under a 100 basis point shock and within the guidelines of +/- 20% from the base case scenario under a 200 basis point shock. The general level of interest rates are at historically low levels and the bank is monitoring its position and the likelihood of further rate changes.
Computation of prospective effects of hypothetical interest rate changes are based on numerous assumptions, including relative levels of market interest rates, loan prepayments and declines in deposit balances, and should not be relied upon as indicative of actual results. Further, the computations do not contemplate any actions the Company may undertake in response to changes in interest rates.
Certain shortcomings are inherent in the method of analysis presented in the computation of EVE. Actual values may differ from those projections set forth in the table, should market conditions vary from assumptions used in the preparation of the table. Certain assets, such as adjustable-rate loans, have features that restrict changes in interest rates on a short-term basis and over the life of the asset. In addition, the proportion of adjustable-rate loans in First Mid Bank's portfolio change in future periods as market rates change. Further, in the event of a change in interest rates, prepayment and early withdrawal levels would likely deviate significantly from those assumed in the table. Finally, the ability of many borrowers to repay their adjustable-rate debt may decrease in the event of an interest rate increase.
ITEM 8. FINANCIAL STATEMEN TS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements
Page
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Changes in Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Report of Independent Registered Accounting Firm ( Forvis Mazars, LLP , St. Louis, MO, PCAOB Firm ID No. 686 )
Consolidate d Balance Sheets
December 31, 2025 and 2024
(In thousands, except share data)
Assets
Cash and due from banks:
Non-interest-bearing
Interest-bearing
Federal funds sold
Cash and cash equivalents
Certificates of deposit
Investment securities:
Available-for-sale, at fair value (amortized cost of $ 1,215,813 and $ 1,257,436 at December 31, 2025 and 2024, respectively)
Held-to-maturity, at amortized cost (estimated fair value of $ 2,288 and $ 2,279 at December 31, 2025 and 2024, respectively)
Equity securities, at fair value
Loans held for sale, at fair value
Loans
Less allowance for credit losses
Net loans
Interest receivable
Other real estate owned, net
Premises and equipment, net
Goodwill, net
Intangible assets, net
Bank owned life insurance
Right of use asset
Tax assets
Other assets
Total assets
Liabilities and stockholders’ equity
Deposits:
Non-interest-bearing
Interest-bearing
Total deposits
Repurchase agreements with customers
Interest payable
Other borrowings
Junior subordinated debentures, net
Subordinated debt, net
Lease liability
Other liabilities
Total liabilities
Commitments and contingent liabilities (Note 17)
Stockholders’ equity:
Common stock, $ 4 par value; authorized 45,000,000 shares; issued 24,671,969 and 24,564,356 shares in 2025 and 2024, respectively; outstanding 23,986,299 and 23,895,807 shares in 2025 and 2024, respectively
Additional paid-in capital
Retained earnings
Deferred compensation
Accumulated other comprehensive loss
Treasury stock at cost, 685,670 and 668,549 shares in 2025 and 2024, respectively
Total stockholders’ equity
Total liabilities and stockholders’ equity
See accompanying notes to consolidated financial statements.
Consolidated Stat ements of Income
For the years ended December 31, 2025, 2024, and 2023
(In thousands, except per share data)
Interest income:
Interest and fees on loans
Interest on investment securities
Taxable
Exempt from federal income tax
Interest on certificates of deposit
Interest on federal funds sold
Interest on deposits with other financial institutions
Total interest income
Interest expense:
Interest on deposits
Interest on securities sold under repurchase agreements with customers
Interest on other borrowings
Interest on junior subordinated debentures
Interest on subordinated debt
Total interest expense
Net interest income
Provision for credit losses
Net interest income after provision for credit losses
Other income:
Wealth management revenues
Insurance commissions
Service charges
Securities gains (losses), net
Mortgage banking revenue, net
ATM / debit card revenue
Bank owned life insurance
Other income
Total other income
Other expense:
Salaries and employee benefits
Net occupancy and equipment expense
Net other real estate owned expense
FDIC insurance expense
Amortization of intangible assets
Stationery and supplies
Legal and professional
ATM / debit card expense
Marketing and donations
Other expense
Total other expense
Income before income taxes
Income taxes
Net income
Per share data:
Basic net income per common share
Diluted net income per common share
See accompanying notes to consolidated financial statements.
Consolidated Statements of Comprehensive Income
For the years ended December 31, 2025, 2024, and 2023
(In thousands)
Net income
Other comprehensive income (loss)
Unrealized gains (losses) on available-for-sale securities, net of taxes of ($ 14,757 ), $ 2,357 , and ($ 7,140 ) for the years ended December 31, 2025, 2024 and 2023, respectively
Less: reclassification adjustment for realized gains (losses) included in net income net of taxes of ($ 685 ), ($ 119 ), and $ 981 for the years ended December 31, 2025, 2024 and 2023, respectively
Other comprehensive income (loss), net of taxes
Comprehensive income
See accompanying notes to consolidated financial statements.
Consolidated Statements of Cha nges in Stockholders’ Equity
For the years ended December 31, 2025, 2024, and 2023
(In thousands, except share and per share data)
Accumulated
Additional
Other
Common
Paid-In-
Retained
Deferred
Comprehensive
Treasury
Stock
Capital
Earnings
Compensation
Loss
Stock
Total
December 31, 2024
Net income
Other comprehensive income, net of tax
Dividends on common stock ($. 98 per share)
Issuance of 72,583 restricted common shares pursuant to the 2017 stock incentive plan, net of forfeitures
Issuance of 5,717 common shares pursuant to the 2017 stock incentive plan, net of forfeitures
Issuance of 29,313 common shares pursuant to employee stock purchase plan
Purchase of 17,121 treasury shares
Deferred compensation
Grant of restricted stock units pursuant to the 2017 stock incentive plan
Release of restricted stock units pursuant to the 2017 stock incentive plan
Vested restricted shares/units compensation expense
December 31, 2025
See accompanying notes to consolidated financial statements.
Consolidated Statements of Changes in Stockholders’ Equity
For the years ended December 31, 2025, 2024, and 2023
(In thousands, except share and per share data)
Accumulated
Additional
Other
Common
Paid-In-
Retained
Deferred
Comprehensive
Treasury
Stock
Capital
Earnings
Compensation
Income (Loss)
Stock
Total
December 31, 2023
Net income
Other comprehensive loss, net of tax
Dividends on common stock ($. 94 per share)
Issuance of 45,995 restricted common shares pursuant to the 2017 stock incentive plan, net of forfeitures
Issuance of 5,717 common shares pursuant to the 2017 stock incentive plan, net of forfeitures
Issuance of 32,936 common shares pursuant to employee stock purchase plan
Issuance costs pursuant to acquisition of Blackhawk Bancorp, Inc.
Purchase of 15,978 treasury shares
Deferred compensation
Grant of restricted stock units pursuant to the 2017 stock incentive plan
Release of restricted stock units pursuant to the 2017 stock incentive plan
Vested restricted shares/units compensation expense
December 31, 2024
See accompanying notes to consolidated financial statements.
Consolidated Statements of Changes in Stockholders’ Equity
For the years ended December 31, 2025, 2024, and 2023
(In thousands, except share and per share data)
Accumulated
Additional
Other
Common
Paid-In-
Retained
Deferred
Comprehensive
Treasury
Stock
Capital
Earnings
Compensation
Income (Loss)
Stock
Total
December 31, 2022
Net income
Other comprehensive income, net of tax
Dividends on common stock ($. 92 per share)
Issuance of 54,431 restricted common shares pursuant to the 2017 stock incentive plan, net of forfeitures
Issuance of 4,600 common shares pursuant to the 2017 stock incentive plan, net of forfeitures
Issuance of 38,989 common shares pursuant to employee stock purchase plan
Issuance of 3,290,222 common shares pursuant to acquisition of Blackhawk Bancorp, Inc., net proceeds
Purchase of 13,481 treasury shares
Deferred compensation
Grant of restricted stock units pursuant to the 2017 stock incentive plan
Release of restricted stock units pursuant to the 2017 stock incentive plan
Vested restricted shares/units compensation expense
December 31, 2023
See accompanying notes to consolidated financial statements.
Consolidated Statem ents of Cash Flows
For the years ended December 31, 2025, 2024, and 2023
(In thousands)
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses
Depreciation, amortization and accretion, net
Change in cash surrender value of bank owned life insurance
Gain on cash surrender value of bank owned life insurance
Stock-based compensation expense
Operating lease payments
Loss (gain) on sale of investment securities, net
Loss (gain) on sale of other real property owned, net
Loss (gain) on sale of premises and equipment
Gain on sale of loans held for sale, net
Loss (gain) on repayment of subordinated debentures
Gain on repayment of other borrowings
Deferred income taxes
Increase in accrued interest receivable
Increase in accrued interest payable
Origination of loans held for sale
Proceeds from sale of loans held for sale
Decrease (increase) in other assets
(Decrease) Increase in other liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Proceeds from maturities of certificates of deposit investments
Purchase of certificates of deposit investments
Proceeds from sales of investment securities available-for-sale
Proceeds from maturities of investment securities available-for-sale
Proceeds from maturities of investment securities held-to-maturity
Purchase of investment securities available-for-sale
Purchase of held-to-maturity investment securities
Net increase in loans
Purchases of premises and equipment
Proceeds from sale of premises and equipment
Proceeds from sales of other real property owned, net
Proceeds from bank owned life insurance death benefit
Net cash (used in) provided by acquisition
Net cash (used in) provided by investing activities
Cash flows from financing activities:
Net increase (decrease) in deposits
Decrease in repurchase agreements
Proceeds from other borrowings
Repayment of other borrowings
Proceeds from short-term debt
Repayment of short-term debt
Repayment of subordinated debentures
Proceeds from issuance of common stock
Purchase of treasury stock
Dividends paid on common stock
Net cash (used in) provided by financing activities
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Consolidated Statements of Cash Flows (continued)
For the years ended December 31, 2025, 2024, and 2023
(In thousands)
Supplemental disclosures of cash flow information
Cash paid (received) during the period for:
Interest
Income taxes, net of refunds:
US Federal
State of Illinois
State of Missouri
State of Wisconsin
Other
Total income taxes, net of refunds
Supplemental disclosures of noncash investing and financing activities
Loans transferred to other real estate owned
Fixed assets transferred to other real estate owned
Initial recognition of right-of-use assets in exchange for lease liabilities
Supplemental disclosure of purchase of capital stock
Fair value of assets acquired
Consideration paid:
Cash paid
Common stock issued
Total consideration paid
Fair value of liabilities assumed
See accompanying notes to consolidated financial statements.
First Mid Bancshares, Inc.
Notes to C onsolidated Financial Statements
Note 1 – Basis of Accounting and Consolidation
The accompanying 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”), First Mid Wealth Management Company, First Mid Insurance Group, Inc. (“First Mid Insurance”) and First Mid Captive, Inc. All significant intercompany balances and transactions have been eliminated in consolidation. The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America.
Acquisitions
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. was acquired by the Company for a purchase price of $ 10.1 million and instantly merged into First Mid Insurance Group.
Purdum, Gray, Ingledue, Beck, Inc. During the quarter ended June 30, 2024, Purdum, Gray, Ingledue, Beck, Inc. was acquired by the Company for a purchase price of $ 10.2 million and instantly merged into First Mid Insurance Group.
Blackhawk Bancorp, Inc. On March 20, 2023, the Company and Eagle Sub LLC, a newly formed Wisconsin limited liability company and wholly-owned subsidiary of the Company, entered into an Agreement and Plan of Merger (the “Blackhawk Merger Agreement”) with Blackhawk Bancorp, Inc., a Wisconsin corporation (“Blackhawk”), pursuant to which, among other things, agreed to acquire 100 % of the issued and outstanding shares of Blackhawk pursuant to a business combination whereby Blackhawk merged with and into Merger Sub, whereupon the separate corporate existence of Blackhawk ceased and Merger Sub continued as the surviving company and a wholly-owned subsidiary of the Company (the “Blackhawk Merger”).
Subject to the terms and conditions of the Blackhawk Merger Agreement, at the effective time of the Blackhawk Merger, each share of common stock, par value $ 0.01 per share, of Blackhawk issued and outstanding immediately prior to the effective time of the Blackhawk Merger (other than shares held in treasury by Blackhawk and dissenting shares) were converted into and became the right to receive 1.15 shares of common stock, par value $ 4.00 per share, 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 Blackhawk Merger to Blackhawk’s shareholders and equity award holders was 3,290,222 shares of Company common stock valued at $ 93.5 million and $ 2,000 of cash in lieu of fractional shares.
The Blackhawk Merger closed August 15, 2023 and Blackhawk Bank was merged into First Mid Bank on December 1, 2023.
Note 7 provides further information on the intangibles acquired in the above acquisitions.
Pending Acquisitions
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 "Two Rivers 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 will merge with and into Star Sub LLC, whereupon the separate corporate existence of Two Rivers will cease and Star Sub LLC will continue as a surviving company and a wholly-owned subsidiary of the Company (the "Two Rivers Merger").
Subject to the terms and conditions of the Two Rivers Merger Agreement, at the effective time of the Two Rivers Merger, each share of common stock of Two Rivers issued and outstanding immediately prior to the effective time of the Two Rivers Merger (other than shares held in treasury by Two Rivers) will be converted into and become 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 Two Rivers Merger to Two Rivers' shareholders and equity award holders is approximately 2,556,140 shares of Company common stock. The Two Rivers Merger is anticipated to be completed on February 28, 2026, and has been approved by the appropriate regulatory authorities and the shareholders of Two Rivers. The Company will account for the Two Rivers Merger under ASC 805, Business Combinations, upon closing.
General Litigation
The Company is subject to claims and lawsuits that arise primarily in the ordinary course of business. It is the opinion of management that the disposition or 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.
Summary of Significant Accounting Policies
Segment Reporting
The Company operates as a single segment entity for financial reporting purposes and has adopted ASU 2023-07 during the year ended December 31, 2024 . 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 December 31, 2025, management has reviewed the requirements of ASU 2023-07 and has determined that no additional segment disclosures are required. Specifically,
the Company does not use the tracked performance on the disaggregated segment level for decision-making or resource allocation purposes,
no significant segment-specific expenses or performance metrics are used internally for decision-making or resource allocation purposes, and
the level of financial consolidation presented in these financial statements aligns with the CODM’s internal reporting and decision-making process
Based on this assessment the Company’s financial statement disclosures fully comply with ASU 2023-07, and no additional qualitative segment disclosures are necessary.
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The Company uses estimates and employs the judgments of management in determining the amount of its allowance for credit losses and income tax accruals and deferrals, in its fair value measurements of investment securities, and in the evaluation of impairment of loans, goodwill, investment securities, and premises and equipment. As with any estimate, actual results could differ from these estimates. Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for credit losses. In connection with the determination of the allowance for credit losses, management obtains independent appraisals for significant properties.
Fair Value Measurements
The fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The Company estimates the fair value of a financial instrument using a variety of valuation methods. Where financial instruments are actively traded and have quoted market prices, quoted market prices are used for fair value. When the financial instruments are not actively traded, other observable market inputs, such as quoted prices of securities with similar characteristics, may be used, if available, to determine fair value. When observable market prices do not exist, the Company estimates fair value. The Company’s valuation methods consider factors such as liquidity and concentration concerns. Other factors such as model assumptions, market dislocations, and unexpected correlations can affect estimates of fair value. Imprecision in estimating these factors can impact the amount of revenue or loss recorded.
At the end of each quarter, the Company assesses the valuation hierarchy for each asset or liability measured. From time to time, assets or liabilities may be transferred within hierarchy levels due to changes in availability of observable market inputs to measure fair value at the measurement date. Transfers into or out of hierarchy levels are based upon the fair value at the beginning of the reporting period. A more detailed description of the fair values measured at each level of the fair value hierarchy can be found in Note 11 – “Disclosures of Fair Values of Financial Instruments.”
Cash and Cash Equivalents
For purposes of reporting cash flows, cash equivalents include non-interest-bearing and interest-bearing cash and due from banks and federal funds sold. Generally, federal funds are sold for one-day periods.
Certificates of Deposit Investments
Certificates of deposit investments have original maturities of three to five years and are carried at cost.
Investment Securities
The Company classifies its investments in debt securities as either held-to-maturity or available-for-sale in accordance with ASC 320. Securities classified as held-to-maturity are recorded at cost or amortized cost. Available-for-sale securities are carried at fair value. Due to the subjective nature of the valuation process, it is possible that the actual fair values of these investments could differ from the estimated amounts, thereby affecting the financial position, results of operations and cash flows of the Company.
For AFS securities, management determines whether the decline in fair value below the amortized cost basis (impairment) is due to credit-related or other factors. In making that evaluation, management considers the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability of the Company to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value. Any impairment on AFS securities that is related to factors other than credit is recognized in other comprehensive income, net of related deferred income taxes. Credit-related impairment on AFS securities is recognized as an allowance for credit losses ("ACL") on the balance sheet based on the amount by which the amortized cost basis exceeds the fair value, with a corresponding charge to net income. Both the ACL and charge to net income may be reversed if conditions change. However, if the Company intends to sell, or more likely than not will be required to sell, an impaired AFS security before recovering its amortized cost basis, the entire impairment must be recognized in net
income with a corresponding adjustment to the security's amortized cost basis rather than through the establishment of an ACL. For HTM securities, management determines whether an ACL is necessary after considering the facts and circumstances of the underlying investment securities and evaluates expected credit losses by security type, aggregated by similar risk characteristics, based on historical credit losses adjusted for current conditions and supportable forecasts.
Loans
Loans are stated at the principal amount outstanding net of unearned discounts, unearned income, and the 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 approximate the effective interest rate method. Interest on substantially all loans is credited to income based on the principal amount outstanding.
The Company’s policy is to discontinue the accrual of interest income on any loan that becomes ninety days past due as to principal or interest or earlier when, in the opinion of management there is reasonable doubt as to the timely collection of principal or interest. 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 collectability of interest or principal.
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.
Allowance for Credit Losses
The Company believes the allowance for credit losses is the critical accounting policy that requires the most significant judgments and assumptions used in the preparation of its consolidated financial statements. An estimate of potential losses inherent in the loan portfolio is determined and an allowance for those losses is established by considering factors including historical loss rates, expected cash flows, and estimated collateral values. In assessing these factors, the Company uses organizational history and experience with credit decisions and related outcomes. The allowance for credit losses represents the best estimate of losses inherent in the existing loan portfolio. The allowance for credit losses is increased by the provision for credit losses charged to expense and reduced by loans charged off, net of recoveries. The Company evaluates the allowance for credit losses at least quarterly. If the underlying assumptions later prove to be based on subsequent evaluations, the allowance for credit is adjusted.
The Company first bifurcates the loan portfolio into segments that share risk characteristics and then utilizes a 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 unemployment is a loss driver used in all portfolios.
The Company individually evaluates certain loans for impairment. A specific allowance is assigned to a loan when expected cash flows or collateral do not justify the carrying amount of the loan. Because the economic and business climate in any given industry or market, and its impact on any given borrower, can change rapidly, the risk profile of the loan portfolio is continually assessed and adjusted when appropriate. Notwithstanding these procedures, there still exists the possibility that the assessment could prove to be significantly incorrect and that an immediate adjustment to the allowance for credit losses would be required.
Premises and Equipment
Premises, equipment, and capitalized software are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are charged to expense and determined principally by the straight-line method over the estimated useful lives of the assets. The estimated useful lives for each major depreciable classification of premises, equipment and capitalized software are as follows:
Buildings and improvements
20 years to 40 years
Leasehold improvements
5 years to 15 years
Furniture and equipment
3 years to 7 years
Capitalized Software
3 years to 10 years
Goodwill and Intangible Assets
The Company has goodwill from business combinations, identifiable intangible assets assigned to core deposit relationships and customer lists acquired, and intangible assets arising from the rights to service mortgage loans for others.
Identifiable intangible assets generally arise from branches acquired that the Company accounted for as purchases. Such assets consist of the excess of the purchase price over the fair value of net assets acquired, with specific amounts assigned to core deposit relationships and customer lists primarily related to the insurance agency and Wealth Management Company. Intangible assets are amortized by the straight-line method over various periods up to fifteen years . Management reviews intangible assets for possible impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
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.
Other Real Estate Owned
Other real estate owned acquired through loan foreclosure is 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 the 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 temporarily 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 expense.
Bank Owned Life Insurance
First Mid Bank has purchased life insurance policies on certain senior management. Bank owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts that are probable at settlement.
Federal Home Loan Bank Stock
Federal Home Loan Bank stock is a required investment for institutions that are members of the Federal Home Loan Bank system. The required investment in the common stock is based on a predetermined formula and carried at cost. This investment is presented in other assets on the Consolidated Balance Sheet.
Income Taxes
The Company and its subsidiaries file consolidated federal and state income tax returns with each organization computing its taxes on a separate company basis. Amounts provided for income tax expense are based on income reported for financial statement purposes rather than amounts currently payable under tax laws.
Deferred tax assets and liabilities are recognized for future tax consequences attributable to the temporary differences existing between the financial statement carrying amounts of assets and liabilities and their respective tax basis, as well as operating loss and tax credit carry forwards. To the extent that current available evidence about the future raises doubt about the realization of a deferred tax asset, a valuation allowance is established. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as an increase or decrease in income tax expense in the period in which such change is enacted.
In accordance with GAAP, the Company reviews its uncertain tax positions annually. An uncertain tax position is recognized as a benefit only if it is "more likely than not" that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount actually recognized is the largest amount of tax benefit that is greater than 50% likely to be recognized on examination. For tax positions not meeting the "more likely than not" test, no tax benefit is recorded. A significant amount of judgment is applied to determine both whether the tax position meets the "more likely than not" test as well as to determine the largest amount of tax benefit that is greater than 50% likely to be recognized. Differences between the position taken by management and that of taxing authorities could result in a reduction of a tax benefit or increase to tax liability, which could adversely affect future income tax expense.
Captive Insurance Company
First Mid Captive, Inc. ("the Captive"), a wholly owned subsidiary of the Company which was formed and began operations in December 2019, is a Nevada- based captive insurance company. The Captive insures against certain risks unique to the operations of the Company and its subsidiaries for which insurance may not be currently available or economically feasible in today's insurance marketplace. The Captive pools resources with several other similar insurance company subsidiaries of financial institutions to spread a limited amount of risk among themselves. The Captive is subject to regulations of the State of Nevada and undergoes periodic examinations by the Nevada Division of Insurance. It has elected to be taxed under Section 831(b) of the Internal Revenue Code. Pursuant to Section 831(b), if gross premiums do not exceed $ 2,850,000 , then the Captive is taxable solely on its investment income. The Captive is included in the Company's consolidated financial statements and its federal income return.
Wealth Management Assets
Assets held in fiduciary or agency capacities by First Mid Wealth Management Company are not included in the consolidated balance sheets since such items are not assets of the Company or its subsidiaries. Fees from trust activities are recorded on a cash basis over the period in which the service is provided. Fees are a function of the market value of assets managed and administered, the volume of transactions, and fees for other services rendered, as set forth in the underlying client agreement with the First Mid Wealth Management Company. This revenue recognition involves the use of estimates and assumptions, including components that are calculated based on asset valuations and transaction volumes. Any out-of-pocket expenses or services not typically covered by the fee schedule for trust activities are charged directly to the trust account on a gross basis as trust revenue is incurred. First Mid Wealth Management Company managed assets totaling $ 6.6 billion and $ 6.4 billion at December 31, 2025 and 2024 , respectively.
Treasury Stock
Treasury stock is stated at cost. Cost is determined by the first-in, first-out method.
Stock Incentive Awards
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. The Company awarded 84,097 , 80,332 and 45,986 shares during 2025, 2024, and 2023 , respectively as stock and stock unit awards.
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 is intended to promote the interests of the Company by providing eligible employees with the opportunity to purchase shares of common stock of the Company at a 15 % discount through payroll deductions. The ESPP is also 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. As of December 31, 2025, 2024, and 2023, 29,313 , 32,936 and 38,989 shares, respectively were issued pursuant to the ESPP. As of December 31, 2025 , there were 444,023 shares unassigned but available to be issued under the ESPP.
Leases
The Company has adopted ASU 2016-02, Leases (Topic 842). As of December 31, 2025 substantially all the Company's leases are operating leases are operating leases for real estate property for bank branches, ATM locations, and office space. 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 present value was the Company's incremental borrowing rate which is the FHLB fixed advance rate based on the remaining lease term.
Revenue Recognition
Accounting Standards Codification 606, Revenue from Contracts with Customers (“ASC 606”), establishes a revenue recognition model for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity's contracts to provide goods or services to customers. Most of the Company’s revenue-generating transactions are not subject to ASC 606, including revenue generated from financial instruments, such as loans and investment securities, and revenue related to mortgage servicing activities, which are subject to other accounting standards. A description of the revenue-generating activities that are within the scope of ASC 606, and included in other income in the Company’s condensed consolidated statements of income are as follows:
Trust revenues. The Company generates fee income from providing fiduciary services through its trust department. Fees are billed in arrears based upon the preceding period account balance. Revenue from the farm management department is recorded when service is complete, for example when crops are sold. This revenue is included in wealth management revenues on the consolidated statement of income.
Brokerage commissions. The primary brokerage revenue is recorded at the beginning of each quarter through billing to customers based on the account asset size on the last day of the previous quarter. If a withdrawal of funds takes place, a prorated refund may occur; this is reflected within the same quarter as the original billing occurred. All performance obligations are met within the same quarter that the revenue is recorded. This revenue is included in wealth management revenues on the consolidated statement of income.
Insurance commissions. The Company’s insurance agency subsidiary, First Mid Insurance, receives commissions on premiums of new and renewed business policies. First Mid Insurance records commission revenue on direct bill policies as the cash is received. For agency bill policies, First Mid Insurance retains its commission portion of the customer premium payment and remits the balance to the carrier. In both cases, the entire performance obligation is held by the carriers.
Service charges on deposits. The Company generates revenue from fees charged for deposit account maintenance, overdrafts, wire transfers, and check fees. The revenue related to deposit fees is recognized at the time the performance obligation is satisfied.
ATM/debit card revenue. The Company generates revenue through service charges on the use of its ATM machines and interchange income from the use of Company issued credit and debit cards. The revenue is recognized at the time the service is used and the performance obligation is satisfied.
Other income. Treasury management fees and lock box fees are received and recorded after the service performance obligation is completed. Merchant bank card fees are received from various vendors; however, the performance obligation is with the vendors. The Company records gains on the sale of loans and the sale of OREO properties after the transactions are complete and transfer of ownership has occurred.
As each of the Company’s facilities are located in markets with similar economies, no disaggregation of revenue is necessary.
Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss included in stockholders’ equity as of December 31, 2025 and 2024 are as follows (in thousands):
Unrealized Gain
(Loss) on
Securities
December 31, 2025
Net unrealized losses on securities available-for-sale
Tax benefit
Balance at December 31, 2025
December 31, 2024
Net unrealized losses on securities available-for-sale
Tax benefit
Balance at December 31, 2024
Amounts reclassified from accumulated other comprehensive loss and the affected line items in the statements of income during the years ended December 31, 2025, 2024, and 2023, were as follows (in thousands):
Amounts Reclassified from Other Comprehensive Income
Affected Line Item in the
Statements of Income
Realized gains (losses) on available-for-sale securities
Securities gains (losses), net (total reclassified amount before tax)
Income tax benefit (expense)
Income taxes
Total reclassifications out of accumulated other comprehensive income
Net reclassified amount
See “Note 4 – Investment Securities” for more detailed information regarding unrealized losses on available-for-sale securities.
New Accounting Pronouncements
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:
a loan that is obtained through a business combination accounted for using the acquisition method (most common for the Company)
a loan obtained through a transfer that is a not a business combination accounted for using the acquisition method or initially recognized through the
consolidation of a variable interest entity and these loans must meet both of following criteria:
the loan is obtained more than 90 days after its origination date; and
the acquirer was not involved in the loan’s origination
The Company plans to adopt this standard prospectively as of January 1, 2026.
In December 2023, the Financial Accounting Standards Board issued ASU No. 2023-09, Income Tax (Topic 740): Improvements to Income Tax Disclosures. The amendments expand the disclosure requirements of income taxes, primarily related to the income tax rate reconciliation and income taxes paid with the intention to enhance transparency and decision usefulness of income tax disclosures. The amendments were effective for fiscal years beginning after December 15, 2024. Early adoption was permitted and not implemented by the Company. The adoption of this accounting pronouncement had no impact on the Financial Statements aside from additional disclosures presented in Note 15.
Note 2 -- Earnings Per Share
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 years ended December 31, 2025, 2024, and 2023 were as follows:
Basic net income per common share available to common stockholders:
Net income available to common stockholders
Weighted average common shares outstanding
Basic earnings per common share
Diluted net income per common share available to common stockholders:
Net income available to common stockholders
Weighted average common shares outstanding
Dilutive potential common shares:
Restricted stock awarded
Dilutive potential common shares
Diluted weighted average common shares outstanding
Diluted earnings per common share
There were no shares not considered in computing diluted earnings per share for the years ended December 31, 2025, 2024, and 2023 .
Note 3 -- Cash and Due from Banks
At December 31, 2025, the Company's cash accounts exceeded federal insurance limits by $ 3.7 million . There have been no losses on these accounts.
Note 4 -- Investment Securities
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 December 31, 2025 and 2024 were as follows (in thousands):
Gross
Gross
Amortized
Unrealized
Unrealized
Cost
Gains
(Losses)
Fair Value
December 31, 2025
Available-for-sale:
U.S. Treasury securities and obligations of U.S. government corporations and agencies
Obligations of states and political subdivisions
Mortgage-backed securities (1)
Corporate bonded debt
Total available-for-sale
Held-to-maturity:
Other securities
Total held-to-maturity
December 31, 2024
Available-for-sale:
U.S. Treasury securities and obligations of U.S. government corporations and agencies
Obligations of states and political subdivisions
Mortgage-backed securities (1)
Corporate bonded debt
Total available-for-sale
Held-to-maturity:
Other securities
Total held-to-maturity
(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 $ 4.6 million and $ 4.4 million of equity securities, at fair value, as of December 31, 2025 and 2024, 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 December 31, 2025, 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 years ended December 31, 2025, 2024, and 2023 (in thousands):
Proceeds from sales
Gross gains
Gross losses
Income tax benefit (expense)
The following table presents the aging of gross unrealized losses and fair value by investment category as of December 31, 2025 and 2024 (in thousands):
Less than 12 months
12 months or more
Total
Fair
Unrealized
Fair
Unrealized
Fair
Unrealized
Value
Losses
Value
Losses
Value
Losses
December 31, 2025
Available-for-sale:
U.S. Treasury securities and obligations of U.S. government corporations and agencies
Obligations of states and political subdivisions
Mortgage-backed securities (1)
Corporate bonded debt
Total
December 31, 2024
Available-for-sale:
U.S. Treasury securities and obligations of U.S. government corporations and agencies
Obligations of states and political subdivisions
Mortgage-backed securities (1)
Corporate bonded debt
Total
(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.
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 December 31, 2024 , there were five hundred fifty-seven available-for-sale securities with a fair value of $ 1.0 billion and unrealized losses of $ 193.6 million in a continuous unrealized loss position for twelve months or more.
At December 31, 2025 and December 31, 2024, 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 December 31, 2025, to be experiencing credit losses and recognized no resulting allowance for credit losses. The Company does not intend to sell a significant amount of these investments, 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 subsequent to purchase.
Maturities of investment securities were as follows at December 31, 2025 (in thousands):
Amortized
Estimated
Cost
Fair Value
Available-for-sale:
Due in one year or less
Due in one-five years
Due in five-ten years
Due after ten years
Mortgage-backed securities (1)
Total available-for-sale
Held-to-maturity:
Due after ten years
Total held-to-maturity
(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.
Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
Note 5 -- Loans and Allowance for Credit Losses
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 December 31, 2025 and 2024 follows (in thousands):
Construction and land development
Agricultural real estate
1-4 family residential properties
Multifamily residential properties
Commercial real estate
Loans secured by real estate
Agricultural loans
Commercial and industrial loans
Consumer loans
All other loans
Total gross loans
Less: loans held for sale
Total gross loans held for investment
Less:
Net deferred loan fees, premiums and discounts
Allowance for credit losses
Net loans
Net loans increased $ 335.6 million as of December 31, 2025 compared to December 31, 2024. 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 $ 35.1 million and $ 33.7 million at December 31, 2025 and 2024, 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 thresholds 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 December 31, 2025 (in thousands):
December 31, 2025
Commercial real estate
Owner occupied
Non owner occupied
Shopping centers and malls
Industrial and warehouse
Hotels and motels
Skilled nursing facility
Assisted living facility
Office
Retail
RV parks and campgrounds
Other property types
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 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 and term loans to fund the purchase of equipment. 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. 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 multi-family 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 $ 2,000,000 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 multi-family, 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 thresholds 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.
Allowance for Credit Losses
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 by evaluating large , and large loans separately from other loans.
Individually Evaluated Loans
The C ompany 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, 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
Non-individually evaluated loans comprise the vast majority of the Company’s total loan portfolio and include loans in accrual status and those credits not identified as modified loans. 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 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 reduced slightly for the year due to concentration levels.
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 declined during the year due to this performance.
Residential Real Estate Non-Owner Occupied Loans. The loan segment has remained stable throughout the last several years. Both adversely classified and past dues have been consistent. There was no change to the qualitative factors for this segment.
Residential Real Estate Owner Occupied Loans. The loan segment has remained stable throughout the last several years. The severity of past due loans improved during the year, driving an overall reduction in the qualitative factors associated with this segment.
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. Given the lower trend in interest rates and cash flow stability of the segment, the Company lowered its qualitative factors during the year.
Commercial Real Estate Non-Owner Occupied Loans. This segment includes the Company's largest balances. With fluctuations during the year for the qualitative factor driven by past dues within the segment, the qualitative factors ended the year in line with prior year end.
Agricultural Loans. Losses in this segment are very low. The qualitative factors for this segment fluctuated during the year due to overall past dues. The qualitative factors ended the year lower from improvement in the overall macroeconomic outlook for the agricultural industry including improved commodity prices and proposed government assistance. In addition, overall past due levels drove the qualitative factor lower.
Commercial and Industrial Loans. The qualitative factors for this segment were reduced during the year. Most of the repricing for higher rates in this loan segment has already occurred and prior years increases for higher risk were no longer necessary. In addition, tariff impacts had minimal overall impacts on the portfolio.
Consumer Loans. This segment is a small portion of the Company's loan portfolio. While historical net charge-offs have been immaterial in this segment, there was an increase in past dues that resulted in an increase to the qualitative factor to reflect the higher risk.
Acquired Loans. Loans acquired in a business combination after January 1, 2020, that have experienced more-than-insignificant deterioration in credit quality since origination are considered purchased credit deteriorated (“PCD”) loans. At the acquisition date, an estimate of expected credit losses is made for groups of PCD loans with similar risk characteristics and individual PCD loans without similar risk characteristics. This initial allowance for credit losses is allocated to individual PCD loans and added to the purchase price or acquisition date fair values to establish the initial amortized cost basis of the PCD loans. As the initial allowance for credit losses is added to the purchase price, there is no credit loss expense recognized upon acquisition of a PCD loan. Any difference between the unpaid principal balance of PCD loans and the amortized cost basis is considered to relate to noncredit factors and results in a discount or premium. Discounts and premiums are recognized through interest income on a level-yield method over the life of the loans. For acquired loans not deemed purchased credit deteriorated at acquisition, the differences between the initial fair value and the principal balance are recognized as interest income on a level-yield basis over the lives of the related loans. At the acquisition date, an initial allowance for expected credit is estimated and recorded as credit expense. The subsequent measurement of expected credit for all acquired loans is the same as the subsequent measurement of expected credit for originated loans.
The following tables present the balance in the allowance for credit losses and the recorded investment in loans based on portfolio segment and impairment method as of December 31, 2025, 2024, and 2023 (in thousands):
Construction
and Land
Development
Agricultural
Real Estate
1-4 Family
Residential
Properties
Commercial
Real Estate
Agricultural
Loans
Commercial
and
Industrial
Consumer
Loans
Total
Twelve months ended December 31, 2025
Beginning Balance
Initial allowance on loans purchased with credit deterioration
Provision for credit loss expense
Loans charged off
Recoveries collected
Ending balance
Twelve months ended December 31, 2024
Beginning Balance
Initial allowance on loans purchased with credit deterioration
Provision for credit loss expense
Loans charged off
Recoveries collected
Ending balance
Twelve months ended December 31, 2023
Beginning Balance
Initial allowance on loans purchased with credit deterioration
Provision for credit loss expense
Loans charged off
Recoveries collected
Ending balance
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 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 December 31, 2025 and 2024 (in thousands):
Collateral
Allowance
Real Estate
Business
Assets
Other
Total
for Credit
Losses
Twelve months ended December 31, 2025
Agricultural real estate
1-4 family residential properties
Multifamily residential properties
Commercial real estate
Loans secured by real estate
Commercial and industrial loans
All other loans
Total loans
Twelve months ended December 31, 2024
Agricultural real estate
1-4 family residential properties
Multifamily residential properties
Commercial real estate
Loans secured by real estate
Agricultural loans
Commercial and industrial loans
All other loans
Total loans
Credit Quality
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.
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 December 31, 2025 and 2024 (in thousands):
Term Loans by Origination Year
Revolving
Risk rating
Prior
Loans
Total
December 31, 2025
Construction and land development loans
Pass
Special mention
Substandard
Total
Current period gross writeoffs
Agricultural real estate loans
Pass
Special mention
Substandard
Total
Current period gross writeoffs
1-4 family residential property loans
Pass
Special mention
Substandard
Total
Current period gross writeoffs
Commercial real estate loans
Pass
Special mention
Substandard
Total
Current period gross writeoffs
Agricultural loans
Pass
Special mention
Substandard
Total
Current period gross writeoffs
Commercial and industrial loans
Pass
Special mention
Substandard
Total
Current period gross writeoffs
Consumer loans
Pass
Special mention
Substandard
Total
Current period gross writeoffs
Total loans
Pass
Special mention
Substandard
Total
Current period gross writeoffs
Term Loans by Origination Year
Revolving
Risk rating
Prior
Loans
Total
December 31, 2024
Construction and land development loans
Pass
Special mention
Substandard
Total
Current period gross writeoffs
Agricultural real estate loans
Pass
Special mention
Substandard
Total
Current period gross writeoffs
1-4 family residential property loans
Pass
Special mention
Substandard
Total
Current period gross writeoffs
Commercial real estate loans
Pass
Special mention
Substandard
Total
Current period gross writeoffs
Agricultural loans
Pass
Special mention
Substandard
Total
Current period gross writeoffs
Commercial and industrial loans
Pass
Special mention
Substandard
Total
Current period gross writeoffs
Consumer loans
Pass
Special mention
Substandard
Total
Current period gross writeoffs
Total loans
Pass
Special mention
Substandard
Total
Current period gross writeoffs
The following table presents the Company’s loan portfolio, on an amortized cost basis, aging analysis at December 31, 2025 and 2024 (dollars in thousands):
Total
90 Days
Loans > 90
30-59 days
60-89 days
or More
Total
Total Loans
days and
Past Due
Past Due
Past Due
Past Due
Current
Receivable
Accruing
December 31, 2025
Construction and land development
Agricultural real estate
1-4 family residential properties
Multifamily residential properties
Commercial real estate
Loans secured by real estate
Agricultural loans
Commercial and industrial loans
Consumer loans
All other loans
Total loans
Percent of total loans
December 31, 2024
Construction and land development
Agricultural real estate
1-4 family residential properties
Multifamily residential properties
Commercial real estate
Loans secured by real estate
Agricultural loans
Commercial and industrial loans
Consumer loans
All other loans
Total loans
Percent of total loans
Nonaccrual Loans
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, 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 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 income. Subsequent receipts on non-accrual 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 at December 31, 2025 and December 31, 2024 (in thousands). This table excludes performing purchased credit deteriorated loans and performing loans modified.
Nonaccrual
with no
Allowance for
Nonaccrual
with no
Allowance for
Credit Loss
Nonaccrual
Credit Loss
Nonaccrual
Construction and land development
Agricultural real estate
1-4 family residential properties
Multifamily residential properties
Commercial real estate
Loans secured by real estate
Agricultural loans
Commercial and industrial loans
Consumer loans
All other loans
Total loans
The aggregate principal balances of nonaccrual, past due ninety days or more loans were $ 31.1 million and $ 28.8 million at December 31, 2025 and 2024, respectively. Interest income that would have been recorded under the original terms of such nonaccrual loans totaled $ 1.2 million , $ 1.4 million and $ 412,000 in 2025, 2024, and 2023, respectively.
Loan Modification to Borrowers Experiencing Financial Difficulty
The following table shows the amortized cost of loans at December 31, 2025 and 2024 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.
Total
Payment
Term
Interest
Class of
Delay
Extension
Rate
Financing
Investment
Modifications
Reduction
Receivable
December 31, 2025
Agricultural real estate
1-4 family residential properties
Commercial real estate
Loans secured by real estate
Commercial and industrial loans
Consumer loans
Total
December 31, 2024
Agricultural real estate
1-4 family residential properties
Commercial real estate
Loans secured by real estate
Commercial and industrial loans
Consumer loans
Total
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 December 31, 2025.
Days Past
Due
Days Past
Due
90 Days or
More
Past Due
Total Past
Due
December 31, 2025
Commercial real estate
Loans secured by real estate
Commercial and industrial loans
Total loans
The following table shows the financial effect of loan modifications during the current quarter to borrowers experiencing financial difficulty for the three months ended December 31, 2025.
Weighted Average
Weighted Average
Interest Rate
Term Extension
Reduction
(in months)
Agricultural real estate
1-4 family residential properties
Commercial real estate
Commercial and industrial loans
Consumer loans
Other Loans
A loan is considered to be in payment default once it is 90 days past due under the modified terms. There were no loans modified during the prior twelve months that experienced defaults for twelve months ended December 31, 2025.
At December 31, 2025 and 2024, the balance of real estate owned include $ 2.9 million and $ 2.2 million respectively of foreclosed real estate properties recorded as a result of obtaining physical possession of the property. At December 31, 2025 and 2024, the recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceeds were in process was $ 1.3 million and $ 2.8 million .
Purchased Credit Deteriorated (PCD) Loans
During 2023, the Company acquired loans from Blackhawk Bank, for which there was, at acquisition, evidence of more than insignificant deterioration of credit quality since origination. The carrying amount of those loans is as follows (in thousands):
Blackhawk Acquisition
Purchase price of purchase credit deteriorated loans at acquisition
Allowance for credit losses at acquisition
Non-credit discount/(premium) at acquisition
Fair value of purchased credit deteriorated loans at acquisition
Note 6 -- Premises and Equipment, Net
Premises and equipment at December 31, 2025 and 2024 consisted of (in thousands):
Land
Buildings and improvements
Furniture and equipment
Leasehold improvements
Capitalized software
Construction in progress
Subtotal
Accumulated depreciation and amortization
Total
Depreciation and amortization expense was $ 5.2 million , $ 4.9 million , and $ 5.0 million for the years ended December 31, 2025, 2024, and 2023 , respectively. This expense is included in net occupancy and equipment expense on the Consolidated Statements of Income.
Note 7 -- Goodwill and Intangible Assets
The Company has goodwill from business combinations, intangible assets from branch acquisitions, 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 December 31, 2025 and 2024 (in thousands):
Gross
Carrying
Accumulated
Gross
Carrying
Accumulated
Value
Amortization
Value
Amortization
Goodwill
Core deposit intangibles
Customer list intangibles
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 .
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. First Mid Wealth Management was assigned all of this intangible asset. 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. First Mid Insurance was assigned all of this intangible asset. 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. First Mid Insurance was assigned all this goodwill.
The following provides a reconciliation of the purchase price paid for Mid Rivers Insurance Group, Inc. and the amount of goodwill recorded (in thousands):
Unallocated purchase price
Less purchase accounting adjustments:
Insurance Company intangible
Other liabilities
Resulting goodwill from acquisition
Goodwill of $ 50.1 million was recorded for the acquisition and merger of Blackhawk Bancorp, Inc. during the third quarter of 2023. All this goodwill was assigned to the banking unit of the Company. The goodwill will not be deductible for tax purposes.
The following table provides a reconciliation of the purchase price paid for the acquisition of Blackhawk and the amount of goodwill recorded (in thousands):
Unallocated purchase price
Less purchase accounting adjustments:
Fair value of securities
Fair value of loans, net
Fair value of premises and equipment
Fair value of time deposits
Fair value of subordinated and jr subordinated debentures
Increase in core deposit intangible
Increase in mortgage servicing rights
Other assets
Resulting goodwill from acquisition
During the quarter ended June 30, 2023, goodwill of $ 6.0 million was recorded for the acquisition of the stock of Purdum, Gray, Ingledue, Beck, Inc., in connection with its insurance business. First Mid Insurance was assigned all this goodwill.
The following provides a reconciliation of the purchase price paid for Purdum, Gray, Ingledue, Beck, Inc. and the amount of goodwill recorded (in thousands):
Unallocated purchase price
Less purchase accounting adjustments:
Insurance Company intangible
Other liabilities
Resulting goodwill from acquisition
The unpaid principal balance of mortgage loans serviced for others was $ 509.7 million and $ 572.6 million at December 31, 2025 and 2024 , respectively. 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 December 31, 2025 and 2024 (in thousands):
December 31, 2025
December 31, 2024
Beginning balance
Adjustment to valuation reserve
Mortgage servicing rights amortized
Interest only strip
Ending balance
Fair value of portfolio
Total amortization expense for the years ended December 31, 2025, 2024, and 2023 was as follows (in thousands):
Core deposit intangibles
Customer list intangibles
Mortgage servicing rights
Estimated amortization expense for each of the five succeeding years is shown in the table below (in thousands):
For year ended 12/31/26
For year ended 12/31/27
For year ended 12/31/28
For year ended 12/31/29
For year ended 12/31/30
The weighted average amortization period for core deposit, customer lists and total intangibles was 2.91 , 4.22 and 3.44 years respectively, at December 31, 2025 .
Note 8 – Deposits
As of December 31, 2025 and 2024, deposits consisted of the following (in thousands):
Demand deposits:
Non-interest-bearing
Interest-bearing
Savings
Money market
Time deposits
Total deposits
As of December 31, 2025, 2024, and 2023, the aggregate amount of time deposits in denominations of more than $250,000 was as follows (in thousands):
Time deposit balances in denominations of more than $250,000
The following table shows the amount of maturities for all time deposits as of December 31, 2025 (in thousands):
Less than 1 year
1 year to 3 years
3 years to 5 years
Over 5 years
Total
In 2025, the Company maintained account relationships with various public entities throughout its market areas. These public entities had total balances of approximately $ 193.6 million and $ 261.2 million in various checking accounts and time deposits as of December 31, 2025 and 2024 , respectively. These balances are subject to change depending upon the cash flow needs of the public entity.
Note 9 -- Repurchase Agreements and Other Borrowings
As of December 31, 2025 and 2024 borrowings consisted of the following (in thousands):
Securities sold under agreements to repurchase
Federal Home Loan Bank-overnight
Federal Home Loan Bank (FHLB) fixed-term advances
Subordinated debt
Junior subordinated debentures
Total
Aggregate annual maturities of FHLB advances and debt (excluding unamortized discounts and premiums) at December 31, 2025 are (in thousands):
Subordinated
Jr. Subordinated
FHLB
Debt
Debentures
Total
Thereafter
Unamortized discount
FHLB advances represent borrowings by First Mid Bank to fund loan demand. At December 31, 2025 the advances totaling $ 270.0 million were as follows:
Advance
Term (in years)
Interest Rate
Maturity Date
June 15, 2026
May 10, 2027
May 17, 2027
June 29, 2028
June 27, 2029
October 3, 2029
October 3, 2029
December 31, 2029
February 7, 2030
August 14, 2030
November 25, 2030
March 5, 2035
Securities sold under agreements to repurchase have overnight maturities and a weighted average rate of 1.88 % .
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):
December 31, 2025
December 31, 2024
US Treasury securities and obligations of U.S. government corporations and agencies
Mortgage-backed securities
Total
(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.
At December 31, 2025, there was no outstanding loan balance on the revolving credit agreement with The Northern Trust Company. This loan was renewed on April 4, 2025 for one year as a revolving credit agreement with a maximum available balance of $ 15 million . The interest rate is floating at 2.25 % over the federal funds rate. The loan is unsecured. Management believes that the Company and its subsidiary bank was in compliance with all the existing covenants at December 31, 2025 and 2024.
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 December 31, 2025 and 2024, 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 December 31, 2025, $ 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 December 31, 2025, $ 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 December 31, 2025, $ 500,000 in aggregate principal amount of Blackhawk Subordinated Debt II Notes remain 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 June 15, 2011 and then converted to floating rate (SOFR plus 160 basis points) after June 15, 2011 ( 5.59 % and 6.81 % at December 31, 2025 and 2024, 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 2025, bear interest at three-month SOFR plus 185 basis points ( 5.84 % and 7.06 % at December 31, 2025 and 2024, respectively) and resets 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 ( 5.69 % and 6.91 % at December 31, 2025 and 2024, respectively) and resets 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 of 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 ( 7.20 % and 8.17 % at December 31, 2025 and 2024, respectively) and resets 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 ( 6.02 % and 7.25 % at December 31, 2025 and 2024, respectively) and resets quarterly.
The trust preferred securities issued by Trust II, CLST I, FBTCSTI, BHST I, and BHST II 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. Similarly, the final rule implementing the Basel III reforms allows holding companies with less than $15 billion in consolidated assets as of December 31, 2009 to continue to count toward Tier 1 capital any trust preferred securities issued before May 19, 2010. 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 an interim final rule to permit banking entities to retain interests in certain collateralized debt obligations backed primarily by trust preferred securities. Under the interim 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 or First Mid Bank.
Note 10 -- 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”), and First Mid Bank follow similar minimum regulatory requirements established for national banks by the Office of the Comptroller of the Currency (“OCC”). 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 each regulatory capital standards to ensure capital adequacy require the Company and its subsidiary bank to maintain a minimum capital amounts and ratios (set forth in the table below). Management believes that, as of December 31, 2025 and 2024, the Company and First Mid Bank met all capital adequacy requirements.
As of December 31, 2025 and 2024, the most recent notification from the primary regulators categorized First Mid 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 table below. At December 31, 2025, there were no conditions or events since the most recent notification that management believes have changed this categorization.
Actual
Required Minimum For Capital Adequacy Purposes with Capital Buffer
To Be Well-Capitalized Under Prompt Corrective Action Provisions
(Dollars in thousands)
Amount
Ratio
Amount
Ratio
Amount
Ratio
December 31, 2025
Total capital (to risk-weighted assets)
Company
First Mid Bank
Tier 1 capital (to risk-weighted assets)
Company
First Mid Bank
Common equity tier 1 capital (to risk-weighted assets)
Company
First Mid Bank
Tier 1 capital (to average assets)
Company
First Mid Bank
December 31, 2024
Total capital (to risk-weighted assets)
Company
First Mid Bank
Tier 1 capital (to risk-weighted assets)
Company
First Mid Bank
Common equity tier 1 capital (to risk-weighted assets)
Company
First Mid Bank
Tier 1 capital (to average assets)
Company
First Mid Bank
The Company's risk-weighted assets, capital and capital ratios for December 31, 2025 and 2024 were computed in accordance with Basel III capital rules. See heading "Basel III" in the Overview section of this report for a more detailed description of Basel III rules. As of December 31, 2025 and 2024 , the Company and First Mid Bank had capital ratios above the required minimums for regulatory capital adequacy, and First Mid 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 11 -- Disclosures of Fair Values of Financial Instruments
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 1 Valuations 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 2 Valuations 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 3 Unobservable 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 December 31, 2025 and 2024 (in thousands):
Fair Value Measurements Using:
Quoted Prices in
Significant
Significant
Active Markets
Other
Unobservable
for Identical
Observable
Inputs
Fair Value
Assets (Level 1)
Inputs (Level 2)
(Level 3)
December 31, 2025
Available-for-sale securities:
U.S. Treasury securities and obligations of U.S. government corporations and agencies
Obligations of states and political subdivisions
Mortgage-backed securities
Corporate bonded debt
Total available-for-sale securities
Equity securities
Loans held for sale
Derivative assets: interest rate swaps
Total assets
Derivative liabilities: interest rate swaps
December 31, 2024
Available-for-sale securities:
U.S. Treasury securities and obligations of U.S. government corporations and agencies
Obligations of states and political subdivisions
Mortgage-backed securities
Corporate bonded debt
Total available-for-sale securities
Equity securities
Loans held for sale
Derivative assets: interest rate swaps
Total assets
Derivative liabilities: interest rate swaps
The change in fair value of assets measured on a recurring basis using significant unobservable inputs (Level 3) for the years ended December 31, 2025 and 2024 is summarized as follows (in thousands):
Total
December 31, 2025
Beginning balance
Transfers out of Level 3
Purchases
Maturities
Ending balance
December 31, 2024
Beginning balance
Transfers into Level 3
Maturities
Ending balance
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 December 31, 2025 was $ 11.0 million and a fair value of $ 10.4 million resulting in specific loss exposures of $ 605,000 . As of December 31, 2024, the total carrying amount of loans for which a change specific allowance has occurred was $ 17.9 million . These loans had a fair value of $ 16.6 million which resulted in specific loss exposures of $ 1.3 million .
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 the 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 expense. 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 total carrying amount of other real estate owned as of December 31, 2024 was $ 2.2 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 $ 48,000 .
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 December 31, 2025 and 2024 (in thousands):
Fair Value Measurements Using
Quoted Prices
in Active
Significant
Significant
Markets for
Other
Unobservable
Identical Assets
Observable Inputs
Inputs
Fair Value
(Level 1)
(Level 2)
(Level 3)
December 31, 2025
Collateral dependent loans
Foreclosed assets held for sale
December 31, 2024
Collateral dependent loans
Foreclosed assets held for sale
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 December 31, 2025.
Fair Value
Valuation
Range
(in thousands)
Technique
Unobservable Inputs
(Weighted Average)
Collateral dependent loans
Third party valuations
Discount to reflect realizable value
Foreclosed assets held for sale
Third party valuations
Discount to reflect realizable value less estimated selling costs
The following table presents quantitative information about unobservable inputs used in Level 3 fair value measurements other than goodwill at December 31, 2024.
Fair Value
Valuation
Range
(in thousands)
Technique
Unobservable Inputs
(Weighted Average)
Collateral dependent loans
Third party valuations
Discount to reflect realizable value
Foreclosed assets held for sale
Third party valuations
Discount to reflect realizable value less estimated selling costs
The following tables present estimated fair values of the Company’s financial instruments at December 31, 2025 and 2024 (in thousands):
Carrying
Fair
Amount
Value
Level 1
Level 2
Level 3
December 31, 2025
Financial assets
Cash and due from banks
Federal funds sold
Certificates of deposit investments
Available-for-sale securities
Held-to-maturity securities
Equity securities
Loans held for sale
Loans net of allowance for credit losses
Interest receivable
Federal Reserve Bank stock
Federal Home Loan Bank stock
Financial liabilities
Deposits
Securities sold under agreements to repurchase
Interest payable
Federal Home Loan Bank borrowings
Subordinated debentures
Junior subordinated debentures
December 31, 2024
Financial assets
Cash and due from banks
Federal funds sold
Certificates of deposit investments
Available-for-sale securities
Held-to-maturity securities
Equity securities
Loans held for sale
Loans net of allowance for credit losses
Interest receivable
Federal Reserve Bank stock
Federal Home Loan Bank stock
Financial liabilities
Deposits
Securities sold under agreements to repurchase
Interest payable
Federal Home Loan Bank borrowings
Subordinated debentures
Junior subordinated debentures
Note 12 -- Deferred Compensation Plan
The Company follows the provisions of ASC 710, for purposes of the First Mid Bancshares, Inc. Amended and Restated Deferred Compensation Plan (“DCP”). At December 31, 2025, the Company classified the cost basis of its common stock issued and held in trust in connection with the DCP of approximately $ 6.8 million as treasury stock. The Company also classified the cost basis of its related deferred compensation obligation of approximately $ 6.8 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. During 2025 and 2024, the Company issued no common shares pursuant to the DCP.
The Company also maintains deferred compensation arrangements that were acquired in the Soy Capital acquisition. Individual participants in the agreements are primarily business development employees in the First Mid Insurance and First Mid Wealth Management divisions. The total liabilities associated with these agreements are included in other liabilities on the Company's consolidated balance sheets as of December 31, 2025 and 2024 .
Note 13 -- 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. The Company awarded 84,097 , 80,332 and 45,986 shares (under the 2017 Stock Incentive Plan) during 2025, 2024, and 2023, respectively, as stock and stock unit awards. The Company recognizes forfeitures of awarded shares as they occur.
The following table summarizes the compensation cost, net of forfeitures, related to stock-based compensation for the years ended December 31, 2025, 2024, and 2023 (in thousands):
Stock and stock unit awards:
Pre-tax compensation expense
Income tax benefit
Total share-based compensation expense, net of income taxes
The following table summarizes non-vested stock and stock unit activity for the years ended December 31, 2025, 2024, and 2023:
Weighted-avg
Weighted-avg
Weighted-avg
Grant-date
Grant-date
Grant-date
Shares
Fair Value
Shares
Fair Value
Shares
Fair Value
Nonvested, beginning of year
Granted
Vested
Forfeited
Nonvested, end of year
Fair value of shares vested
The fair value of the awards is amortized to compensation expense over the vesting periods of the awards ( four years for restricted stock unit awards and three years for restricted stock awards) and is based on the market price of the Company’s common stock at the date of grant multiplied by the number of shares granted that are expected to vest. As of December 31, 2025, 2024, and 2023, there was $ 2.0 million , $ 1.4 million , and $ 1.5 million , respectively, of total unrecognized compensation cost related to unvested stock and stock unit awards under the SI Plan.
Note 14 -- Retirement Plans
The Company has a defined contribution retirement plan which covers substantially all employees, which for 2025 , provided a Company matching contribution of up to 6 % of pre-tax contributions made by each participant. Employee contributions are limited to the 402(g) limit of compensation. The total expense for the plan amounted to $ 4.7 million , $ 4.8 million and $ 4.0 million in 2025, 2024, and 2023 , respectively.
Note 15 -- Income Taxes
The components of federal and state income tax expense for the years ended December 31, 2025, 2024, and 2023 were as follows (in thousands):
Current
Federal
State
Total current
Deferred
Federal
State
Total deferred
Total
Recorded income tax expense differs from the expected tax expense (computed by applying the applicable statutory U.S. federal tax rate of 21 % to income before income taxes). The principal reasons for the difference are as follows (in thousands):
Amount
Percentage
Amount
Percentage
Amount
Percentage
US statutory income tax rate
Domestic state and local income tax, net of federal
Tax credits (federal)
Nontaxable or nondeductible items (federal)
Tax-exempt income from bank owned life insurance
Nondeductible interest expense
Other tax-exempt income
Other
Changes in valuation allowances (federal)
Changes in tax laws or rates enacted in the current period
Changes in unrecognized tax benefits (federal), net
Other items
Effective tax rate
Tax expense recorded by the Company for the years ended December 31, 2025, 2024, and 2023 included interest or penalties of approximately $ 249,000 , $ 213,000 , and $ 307,000 , respectively. Tax returns filed with the Internal Revenue Service, Illinois, Wisconsin, Florida, Indiana, Missouri, and Texas Department of Re venues are subject to review by law under a three-year statute of limitations. The Company is no longer subject to U.S. federal or state income tax examinations by tax authorities for years before 2022.
On July 4, 2025, The One Big Beautiful Bill Act, was signed into law. The Company has completed its evaluation of the provisions of the bill and does not expect it to have a material impact on its financial statements.
The tax effects of the temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2025 and 2024 are presented below (in thousands):
Deferred tax assets:
Allowance for credit losses
Available-for-sale investment securities
Deferred compensation
Supplemental retirement
Deferred loan costs
Stock compensation expense
Deferred revenue
Acquisition costs
Lease liability
Other
Total gross deferred tax assets
Less valuation allowance
Net deferred tax asset
Deferred tax liabilities:
Intangibles amortization
Prepaid expenses
FHLB stock dividend
Deferred expenses
Purchase accounting
Depreciation
Accumulated accretion
Mortgage servicing rights
Right of use asset
Other
Total gross deferred tax liabilities
Deferred tax assets, net
In evaluating the realizability of its deferred tax assets, the Company assesses whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Based on historical taxable income and projected future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Company will generate sufficient taxable income to realize the deferred tax assets as of December 31, 2024 and 2025, except
for a valuation allowance of $ 682,000 recorded against the 2024 net deferred tax asset related to capital loss carryforwards. In determining the need for this valuation allowance, the Company considered all positive and negative evidence available in assessing whether the weight of such evidence supported recognition of the deferred tax assets related to these capital losses. The Company expects to generate sufficient capital gains in 2025 to utilize the capital loss carryforwards; therefore, the Company has concluded that a valuation allowance is no longer warranted for the related deferred tax asset.
Note 16 -- Dividend Restrictions
The National Bank Act imposes limitations on the amount of dividends that may be paid by a national bank, such as First Mid Bank. Generally, a national bank may pay dividends out of its undivided profits, in such amounts and at such times as the bank’s board of directors deems prudent. Without prior OCC approval, however, a national bank may not pay dividends in any calendar year which, in the aggregate, exceed the bank’s year-to-date net income plus the bank’s adjusted retained net income for the two preceding years. Factors that could adversely affect First Mid Bank’s net income include other-than- temporary impairment on investment securities that result in credit losses and economic conditions in industries where there are concentrations of loans outstanding that result in impairment of these loans and, consequently loan charges and the need for increased allowances for losses. See “Item 1A. Risk Factors,” Note 4 – “Investment Securities” and Note 5 – “Loans” for a more detailed discussion of the factors.
The payment of dividends by any financial institution or its holding company is affected by the requirement to maintain adequate capital pursuant to applicable capital adequacy guidelines and regulations, and a financial institution generally is prohibited from paying any dividends if, following payment thereof, the institution would be undercapitalized. As described above, First Mid Bank exceeded their minimum capital requirements under applicable guidelines as of December 31, 2025. As of December 31, 2025, approximately $ 54.5 million was available to be paid as dividends to the Company by First Mid Bank. Notwithstanding the availability of funds for dividends, however, the OCC may prohibit the payment of any dividends by First Mid Bank if the OCC determines that such payment would constitute an unsafe or unsound practice.
Note 17 -- Commitments and Contingent Liabilities
First Mid Bank enters 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. 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 losses from these instruments.
The off-balance sheet financial instruments whose contract amounts represent credit risk at December 31, 2025 and 2024 were as follows (in thousands):
Unused commitments and lines of credit:
Commercial real estate
Commercial operating
Home equity
Other
Total
Standby letters of credit
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 December 31, 2025 and 2024. 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.
Note 18 -- Related Party Transactions
Certain officers, directors and principal stockholders of the Company and its subsidiaries, their immediate families or their affiliated companies (“related parties”) have loans with one or more of the subsidiaries. Loans to related parties totaled approximately $ 130.3 million and $ 247.9 million at December 31, 2025 and 2024, respectively. Activity during 2025 and 2024 was as follows (in thousands):
Beginning balance
New loans
Loan repayments
Ending balance
Deposits from related parties held by First Mid Bank at December 31, 2025 and 2024 totaled $ 158.5 million and $ 61.2 million , respectively.
Note 19 -- Business Combinations
On August 15, 2023, the Company completed its acquisition of Blackhawk Bancorp, Inc. (“Blackhawk”) pursuant to an Agreement and Plan of Merger, dated March 20, 2023 (the “Blackhawk Merger Agreement”). Pursuant to the Blackhawk Merger Agreement, Blackhawk was merged with and into the Company. Blackhawk shareholders received 1.15 shares of the Company's common stock for each share of Blackhawk common stock.
The Company accounted for the Blackhawk 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, mortgage servicing rights, time deposits, real property, and subordinated debt 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:
(In thousands)
Assets
Cash and due from banks
Loans held for sale
Loans, net
Investments-available for sale
Short-term investments
FHLB stock
Premises and equipment
Accrued interest receivable
Prepaid expenses
Other assets
Core deposit intangible
Income tax receivable
Deferred tax asset
Mortgage servicing rights
Total assets acquired
Liabilities
Deposits
Subordinated and jr. subordinated debt
Accrued interest payable
Accrued and other liabilities
Total liabilities assumed
Net assets acquired
Total consideration
Goodwill
The following table presents a summary of consideration transferred:
(In thousands, except shares)
Common stock issued ( 3,290,222 shares)
Cash consideration
Purchase price
The Company recorded $ 50.1 million of goodwill in connection with the acquisition of Blackhawk, none of which is deductible for tax purposes. The amount of goodwill recorded reflects the synergies and operational efficiencies that are expected to result from the acquisition. 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 credit mark, 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.
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.
Mortgage servicing rights. The Company identified residential mortgage servicing rights intangible asset and determined the fair value using a discounted cash flow analysis. The key inputs and assumptions used in the fair value estimate include prepayment assumptions, servicing costs, delinquencies, foreclosure costs, ancillary income, income earned on float and escrow, interest on escrow, internal rate of return and inflation.
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 flows using market rates offered for time deposits of similar remaining maturities.
Subordinated and jr. subordinated debt. The Subordinated and jr. subordinated debt was fair valued using an income approach. Cash flows were calculated using an annualized contractual rate adjusted for forward interest costs and discounted using a variable discount rate.
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. The sum of the 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.
Non-PCD loans have not experienced a more than insignificant deterioration in credit quality since origination. The difference between the fair value and outstanding balance of the non-PCD loans is recognized as an adjustment to interest income over the lives of the loan.
In accordance with ASC 326, Financial Instruments – Credit Losses , immediately following the acquisition the Company established a $ 3.8 million allowance for credit losses on the $ 618.33 million of acquired non-PCD loans through provision for credit losses in the consolidated statement of operations.
The following table provides a summary of PCD loans purchased as part of the Blackhawk acquisition as of the acquisition date:
(In thousands)
Unpaid principal balance
PCD allowance for credit losses at acquisition
Non-credit discount on acquired loans
Fair value of PCD loans
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 Blackhawk Merger taken place at the beginning of the period (dollars in thousands, except per share data):
Twelve months ended
December 31, 2023
Net interest income
Provision for credit losses
Non-interest income
Non-interest expense
Income before income taxes
Income tax expense
Net income available to common stockholders
Earnings per share
Basic
Diluted
Basic weighted average shares outstanding
Diluted weighted average shares outstanding
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 Blackhawk acquisition, pre-tax, of $ 2.5 million, $ 8.2 million, and $ 0 during the year ended December 31, 2024 and 2023, respectively.
Note 20 -- Leases
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)
Weighted-average discount rate
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
Thereafter
Total minimum lease payments
Less imputed interest
Total lease liability
The components of lease expense for the twelve months ended December 31, 2025 and 2024 were as follows (in thousands):
Operating lease cost
Short-term lease cost
Variable lease cost
Total lease cost
Income from subleases
Net lease cost
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. 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 21 -- 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.
Derivatives Designated as Hedging Instruments
The following table provides the outstanding notional balances and fair value of outstanding derivatives designated as hedging instruments as of December 31, 2025 and 2024 (in thousands):
Weighted Average
Balance Sheet
Remaining Maturity
Notional
Estimated
Derivative
Location
(Years)
Amount
Value
December 31, 2025
Interest rate swap agreements
Other liabilities
December 31, 2024
Interest rate swap agreements
Other liabilities
The effects of fair value hedges on the Company's income statement during the twelve months ended December 31, 2025 and 2024 were as follows (in thousands):
Derivative
Location of Gain (Loss) on Derivative
Interest rate swap agreements
Interest income on loans
Derivative
Location of Gain (Loss) on Hedged Items
Interest rate swap agreements
Interest income on loans
As of December 31, 2025 and 2024, the following amounts were recorded on the balance sheet related to the cumulative basis adjustment for fair value hedges (in thousands):
Cumulative Amount of Fair Value Hedging
Line Item in the Balance Sheet in
Carrying Amount of
Adjustments Included in the Carrying
Which the Hedge Items are Included
the Hedged Assets
Amount of the Hedged Assets
December 31, 2025
Loans
December 31, 2024
Loans
Derivatives Not Designated as Hedging Instruments
The following table provides the outstanding notional balances and fair value of outstanding derivatives not designated as hedging instruments as of December 31, 2025 and 2024 (in thousands):
Weighted Average
Balance Sheet
Remaining Maturity
Notional
Estimated
Location
(Years)
Amount
Value
December 31, 2025
Interest rate swap agreements
Other assets
Interest rate swap agreements
Loans
Interest rate swap agreements
Other liabilities
December 31, 2024
Interest rate swap agreements
Other assets
Interest rate swap agreements
Other liabilities
Note 22 -- Parent Company Only Financial Statements
Presented below are condensed balance sheets, statements of income and cash flows for the Company (in thousands):
First Mid Bancshares, Inc. (Parent Company)
Balance Sheets
December 31,
Assets
Cash
Premises and equipment, net
Investment in subsidiaries
Other assets
Total assets
Liabilities and stockholders’ equity
Liabilities
Debt
Other liabilities
Total liabilities
Stockholders’ equity
Total liabilities and stockholders’ equity
First Mid Bancshares, Inc. (Parent Company)
Statements of Income and Comprehensive Income (Loss)
Years ended December 31,
Income:
Dividends from subsidiaries
Other income
Total income
Operating expenses
Income before income taxes and equity in undistributed earnings of subsidiaries
Income tax benefit
Income before equity in undistributed earnings of subsidiaries
Equity in undistributed earnings of subsidiaries
Net income
Other comprehensive income (loss), net of taxes
Comprehensive income (loss)
First Mid Bancshares, Inc. (Parent Company)
Statements of Cash Flows
Years ended December 31,
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net
Cash provided by (used in) operating activities:
Depreciation, amortization, accretion, net
Dividends received from subsidiary
Equity in undistributed earnings of subsidiaries
Increase in other assets
Increase (decrease) in other liabilities
Net cash provided by (used in) operating activities
Cash flows from investing activities:
Investment in subsidiary
Net cash from (used in) business acquisition
Other
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Repayment of long-term debt
Proceeds from issuance of common stock
Payment to repurchase common stock
Dividends paid on common stock
Net cash provided by (used in) financing activities
Increase (decrease) in cash
Cash at beginning of year
Cash at end of year
Report of Independent Registered Public Accounting Firm
To the Stockholders, Board of Directors, and Audit Committee
First Mid Bancshares, Inc.
Mattoon, Illinois
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of First Mid Bancshares, Inc. (the “Company”) as of December 31, 2025 and 2024, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2025, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 27, 2026 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits.
We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Allowance for Credit Losses
The Company’s loan portfolio and the associated allowance for credit losses (ACL) were $6 billion and $75 million as of December 31, 2025, respectively. As more fully described in Notes 1 and 5 to the financial statements, the Company estimates the allowance for credit losses (ACL) to adequately account for probable losses expected over the remaining contractual life of the loan portfolio. The determination of the ACL requires significant judgment reflecting the Company’s best estimate of expected credit losses. Expected credit losses are measured either on a collective (pool) basis for loans that share similar risk characteristics or the loans are individually evaluated. The Company’s historical credit loss experience provides the basis for the estimate of expected credit losses. Expected credit losses for pooled loans are estimated using a discounted cash flow (DCF) methodology for each loan which incorporates measurements of probability of default (PD), given (LGD), and prepayments and over the contractual term of the loans. Adjustments to historical rates are made using qualitative factors which consider 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.
Auditing management’s ACL estimate involved a high degree of complexity and subjectivity in evaluating management’s use of key qualitative factors, and subjectivity in evaluating the qualitative adjustment in total.
Our audit procedures related to the estimated ACL included the following procedures:
We obtained an understanding of the Company’s process for establishing the ACL, including management’s measurement of the key qualitative factor adjustments of the ACL and the overall ACL amount
We tested the design and operating effectiveness of internal controls over the key assumptions and data used to develop the estimate, including management’s establishment of key qualitative adjustments to the ACL and the overall ACL amount
We assessed the reasonableness of, and evaluated support for, key assumptions used in the model and key qualitative adjustments based on external market data and loan portfolio performance metrics
We tested the completeness and accuracy and evaluated the relevance of the key data used as inputs to the model and key qualitative adjustment estimation process by agreeing a sample of inputs to supporting information
We assessed the reasonableness of the overall ACL amount, including model estimates and qualitative factor adjustments and whether the recorded ACL appropriately reflects expected credit losses on the loan portfolio by considering and comparing past performance of the Company’s loan portfolio, trends in credit quality of the loan portfolio, and trends in the credit quality of peer institutions.
We have served as the Company’s auditor since 2005.
/s/ Forvis Mazars, LLP
St. Louis, Missouri
February 27, 2026
