Business Overview and History
First Mid Bancshares, Inc. (NASDAQ:FMBH) is a diversified financial services company with a rich history and a steadfast commitment to serving its local communities. Founded in 1865, the company has evolved from a small community bank into a regional powerhouse, delivering a comprehensive suite of banking, wealth management, and insurance solutions to its growing customer base.
First Mid Bancshares, Inc. traces its roots back to 1865, when it was established as the First National Bank of Mattoon in Mattoon, Illinois. Over the decades, the company has strategically expanded its footprint, both organically and through a series of strategic acquisitions, solidifying its position as a prominent player in the Midwest banking landscape.
In 1962, the company underwent a significant transformation, restructuring its operations and laying the foundation for future growth. This marked the beginning of a new era for First Mid Bancshares, as it began to expand beyond its original community banking roots.
A pivotal moment in the company's history came in 1998 when First Mid Bancshares became a publicly traded bank holding company. This move provided the organization with access to additional capital, enabling it to pursue more aggressive growth strategies and accelerate its expansion plans.
Throughout its history, First Mid Bancshares has faced various challenges, including the 2008 financial crisis. During this tumultuous period, the company demonstrated its resilience by maintaining a disciplined approach to risk management and focusing on core community banking fundamentals. This strategy allowed First Mid Bancshares to weather the storm and emerge stronger in the aftermath of the crisis.
In recent years, First Mid Bancshares has embraced the digital revolution sweeping the banking industry. The company has made substantial investments in technology to enhance its digital platforms, expand mobile capabilities, and streamline back-office functions. These initiatives have been crucial in improving the customer experience and driving operational efficiencies across the organization.
Despite its growth and technological advancements, First Mid Bancshares has remained true to its community banking roots. The company continues to prioritize building long-term relationships with local businesses and individuals, offering personalized service and tailored financial solutions. This customer-centric approach has been a key differentiator for First Mid Bancshares and has contributed significantly to its steady growth and success over the past six decades.
Financial Performance and Ratios
First Mid Bancshares, Inc. has demonstrated resilience and consistent financial performance, even during challenging economic conditions. As of December 31, 2023, the company reported total assets of $7.59 billion, an increase from $6.74 billion as of December 31, 2022, reflecting the successful integration of the Blackhawk Bancorp acquisition.
The company's net income for the year ended December 31, 2023, was $68.94 million, with a return on average assets (ROAA) of 0.97% and a return on average equity (ROAE) of 10.10%. These figures highlight the company's ability to generate consistent profitability and deliver strong shareholder returns.
For the most recent fiscal year (2023), First Mid Bancshares reported revenue of $274.93 million, net income of $68.94 million, operating cash flow of $72.42 million, and free cash flow of $68.78 million. In the most recent quarter (Q3 2024), the company achieved revenue of $91.18 million, net income of $19.48 million, operating cash flow of $22.68 million, and free cash flow of $25.28 million.
First Mid Bancshares has demonstrated strong year-over-year growth, with revenue increasing by 13.4% and net income growing by 28.8% compared to Q3 2023. This growth was primarily driven by an increase in interest income from loan growth and higher net interest margin.
In terms of capital adequacy, First Mid Bancshares, Inc. maintains a strong balance sheet, with a Tier 1 capital ratio of 12.02% and a total risk-based capital ratio of 14.84% as of December 31, 2023, well above the regulatory well-capitalized thresholds. This solid capital position provides the company with the financial flexibility to navigate economic uncertainties and pursue strategic growth opportunities.
Liquidity
The company's liquidity position is robust, with a loan-to-deposit ratio of 91.1% as of December 31, 2023, indicating a balanced and well-funded balance sheet. First Mid Bancshares, Inc.'s strong liquidity and capital ratios underscore its financial stability and resilience, positioning the company to withstand potential economic headwinds.
Additional liquidity metrics include a debt-to-equity ratio of 0.41, cash and cash equivalents of $164.19 million, and an undrawn $15 million revolving credit facility with The Northern Trust Company as of September 30, 2024. The company's current ratio and quick ratio both stand at 0.34, further illustrating its solid liquidity position.
Diversified Business Model and Growth Initiatives
First Mid Bancshares, Inc.'s diversified business model is a key strength, allowing the company to generate revenue from multiple sources and mitigate risks associated with any single business line. The company's core banking operations, wealth management, and insurance divisions contribute to a well-rounded income stream, enhancing the company's overall financial performance.
The company's primary business segments and products include:
1. Loans: As of September 30, 2024, First Mid Bancshares had total gross loans outstanding of $5.61 billion. The loan portfolio is diversified across various types, with commercial real estate loans comprising the largest portion at 43.5% of total loans. Other loan types include construction and land development loans, agricultural real estate loans, 1-4 family residential property loans, multifamily residential property loans, agricultural loans, commercial and industrial loans, and consumer loans.
2. Deposits: The company's deposit base, totaling $6.09 billion as of September 30, 2024, includes non-interest bearing demand deposits, interest-bearing demand deposits, savings deposits, and time deposits. Interest-bearing deposits make up the largest portion at $4.70 billion.
3. Investment Securities: First Mid Bancshares maintains an investment securities portfolio valued at $1.12 billion on an available-for-sale basis as of September 30, 2024. This portfolio includes U.S. Treasury and government agency securities, mortgage-backed securities, obligations of states and political subdivisions, and equity securities.
4. Wealth Management and Insurance Services: For the nine months ended September 30, 2024, the company's wealth management revenues were $16.54 million, while insurance commissions totaled $21.75 million.
In recent years, First Mid Bancshares, Inc. has placed a strategic emphasis on growing its wealth management and insurance segments, which have consistently delivered strong results. For the nine months ended September 30, 2024, the company's wealth management revenues and insurance commissions increased by 4.7% and 12.0%, respectively, compared to the same period in the prior year.
The company's digital transformation initiatives have also been a focus, as it seeks to enhance the customer experience and improve operational efficiency. First Mid Bancshares, Inc. has invested in technology infrastructure, digital banking capabilities, and data analytics to better serve its customers and remain competitive in the evolving financial services landscape.
Challenges and Risk Factors
While First Mid Bancshares, Inc. has demonstrated resilience, the company is not immune to the challenges facing the banking industry. The prolonged low-interest-rate environment, coupled with the ongoing COVID-19 pandemic, has put pressure on the company's net interest margins and asset quality.
The company's exposure to the agricultural sector, which accounts for a significant portion of its loan portfolio, also presents a unique set of risks. Volatility in commodity prices, adverse weather conditions, and changes in government policies can impact the financial well-being of the company's agricultural customers, potentially leading to increased credit risk and loan losses.
Furthermore, the competitive landscape in the banking industry remains intense, as First Mid Bancshares, Inc. vies for market share with larger regional and national players, as well as emerging fintech disruptors. The company's ability to adapt and innovate its product and service offerings will be crucial in maintaining its competitive edge.
Industry Trends and Geographic Performance
The banking industry has experienced steady growth in recent years, with a compound annual growth rate (CAGR) of 4-5%. First Mid Bancshares has outperformed the industry average, growing revenue at a CAGR of 6.5% over the past three fiscal years.
First Mid Bancshares primarily operates in the Midwest United States, with a focus on Illinois, Missouri, Texas, and Wisconsin. The company does not have significant operations or sales outside of this regional footprint. This geographic concentration allows the company to maintain a strong local presence and deep understanding of its markets, but also exposes it to regional economic fluctuations.
Conclusion
First Mid Bancshares, Inc. (NASDAQ:FMBH) is a well-established community bank with a rich history and a diversified business model. The company's strong financial performance, robust capital and liquidity positions, and strategic initiatives aimed at growth and digital transformation position it well to navigate the challenging environment facing the banking industry.
The company has demonstrated consistent growth, with revenue increasing by 13.4% and net income growing by 28.8% year-over-year in Q3 2024. Its diversified product offerings, including a strong loan portfolio, stable deposit base, and growing wealth management and insurance services, provide multiple revenue streams and help mitigate risks.
While the company faces some unique risks, such as its exposure to the agricultural sector and the ongoing competitive pressures, its experienced management team, prudent risk management practices, and commitment to serving its local communities provide a solid foundation for continued success. As First Mid Bancshares, Inc. continues to execute its growth strategy and adapt to the evolving financial services landscape, it remains a compelling investment opportunity for those seeking exposure to a resilient community banking franchise.