UNITED STATES
SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2026
Or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-36434
(Exact name of Registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization)
(I.R.S. employer identification no.)
(Address of principal executive offices)
(Zip code)
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock
FMBH
NASDAQ Global Market
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ☒
Accelerated filer ☐
Non-accelerated filer ☐
Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
As of August 7, 2026, 26,601,912 common shares, $4.00 par value, were outstanding.
PART I
ITEM 1. FINANCIAL STATEMENTS
First Mid Bancshares, Inc.
Condensed Consolidated Balance Sheets (unaudited)
(In thousands, except share data)
June 30, 2026
December 31, 2025
Assets
Cash and due from banks:
Non-interest-bearing
$
65,466
57,224
Interest-bearing
238,311
197,620
Federal funds sold
76
Cash and cash equivalents
303,853
254,920
Certificates of deposit
4,570
1,740
Investment securities:
Available-for-sale, at fair value (amortized cost of $1,423,969 and $1,215,813 at June 30, 2026 and December 31, 2025, respectively)
1,280,108
1,076,883
Held-to-maturity, at amortized cost (estimated fair value of $2,265 and $2,288 at June 30, 2026 and December 31, 2025, respectively)
2,265
2,288
Equity securities, at fair value
3,620
4,588
Loans held for sale, at fair value
6,724
5,203
Loans
6,927,618
6,006,171
Less allowance for credit losses
(86,989
)
(74,875
Net loans
6,840,629
5,931,296
Interest receivable
43,276
39,949
Other real estate owned, net
5,803
2,857
Premises and equipment, net
101,879
90,782
Goodwill, net
203,604
203,391
Intangible assets, net
69,852
49,625
Bank owned life insurance
187,134
174,915
Right of use assets
12,640
12,674
Current tax assets
7,181
714
Deferred tax assets
60,820
45,453
Other assets
76,009
69,380
Total assets
9,209,967
7,966,658
Liabilities and stockholders’ equity
Deposits:
1,486,592
1,392,534
6,084,952
5,002,739
Total deposits
7,571,544
6,395,273
Repurchase agreements with customers
196,991
196,716
Other borrowings
209,567
270,000
Subordinated debt, net
32,705
60,008
Junior subordinated debt, net
34,077
24,454
Lease liabilities
13,195
13,210
Current tax liabilities
4,387
—
Other liabilities
45,757
48,305
Total liabilities
8,108,223
7,007,966
Commitments and contingent liabilities (Note 12)
Stockholders’ equity:
Common stock ($4 par value; authorized 45,000,000 shares; issued 27,314,752 and 24,671,969 shares in June 30, 2026 and December 31, 2025, respectively; outstanding 26,594,524 and 23,986,299 shares in June 30, 2026 and December 31, 2025, respectively)
111,259
100,688
Additional paid-in capital
615,232
516,984
Retained earnings
505,052
463,543
Deferred compensation
691
2,654
Accumulated other comprehensive loss
(104,824
(101,301
Treasury stock, at cost (720,228 and 685,670 shares in June 30, 2026 and December 31, 2025, respectively)
(25,666
(23,876
Total stockholders’ equity
1,101,744
958,692
Total liabilities and stockholders’ equity
See accompanying notes to unaudited condensed consolidated financial statements.
2
Condensed Consolidated Statements of Income (unaudited)
Three months ended
Six months ended
June 30,
(In thousands, except per share data)
2026
2025
Interest income:
Interest and fees on loans
102,668
84,784
193,654
164,702
Interest on investment securities
Taxable
7,517
5,069
13,529
10,051
Exempt from federal income tax
1,858
1,826
3,731
3,621
Interest on certificates of deposit
34
28
55
64
Interest on federal funds sold
6
8
1
Interest on deposits with other financial institutions
2,801
1,694
4,527
2,521
Total interest income
114,884
93,401
215,504
180,960
Interest expense:
Interest on deposits
30,328
24,964
55,102
48,686
Interest on repurchase agreements with customers
1,030
1,218
2,055
2,398
Interest on other borrowings
2,579
2,043
4,977
3,874
Interest on subordinated debt
710
849
1,880
1,798
Interest on junior subordinated debt
578
464
1,046
932
Total interest expense
35,225
29,538
65,060
57,688
Net interest income
79,659
63,863
150,444
123,272
Provision for credit losses
1,545
2,567
4,143
4,219
Net interest income after provision for credit losses
78,114
61,296
146,301
119,053
Other income:
Wealth management revenues
8,206
5,394
14,581
11,205
Insurance commissions
8,870
7,840
19,677
17,765
Service charges
3,459
2,995
6,539
5,896
Investment securities gains (losses), net
63
83
(181
Mortgage banking revenue, net
814
1,070
1,535
1,781
ATM / debit card revenue
4,799
4,636
8,934
8,282
1,544
1,206
2,884
2,893
Other income
1,078
452
1,041
816
Total other income
28,833
23,593
55,274
48,457
Other expense:
Salaries and employee benefits
38,460
33,623
73,476
65,371
Net occupancy and equipment expense
10,892
7,869
20,718
16,348
Net other real estate owned expense
218
75
430
176
FDIC insurance expense
1,063
873
2,003
1,722
Amortization of intangible assets
3,878
3,121
7,179
6,352
Stationery and supplies
311
367
613
798
Legal and professional
2,760
2,757
5,460
5,833
ATM / debit card expense
2,218
1,144
4,025
2,975
Marketing and donations
818
777
1,642
1,629
Other expense
10,009
4,156
15,806
8,030
Total other expense
70,627
54,762
131,352
109,234
Income before income taxes
36,320
30,127
70,223
58,276
Income taxes
8,531
6,689
16,107
12,667
Net income
27,789
23,438
54,116
45,609
Per share data:
Basic net income per common share
1.05
0.98
2.11
1.91
Diluted net income per common share
1.04
2.10
1.90
3
Condensed Consolidated Statements of Comprehensive Income (unaudited)
(In thousands)
Other comprehensive income (loss)
Unrealized gains (losses) on available-for-sale securities, net of taxes of ($1,476) and ($1,744) for three months ended June 30, 2026 and 2025, respectively and $1,301 and ($4,338) for the six months ended June 30, 2026 and 2025, respectively
3,930
4,640
(3,463
11,542
Less: reclassification adjustment for realized gains (losses) included in net income, net of taxes of ($17) and $0 for three months ended June 30, 2026 and 2025, respectively and ($23) and $50 for the six months ended June 30, 2026 and 2025, respectively
46
60
(131
Other comprehensive income (loss), net of taxes
3,884
(3,523
11,673
Comprehensive income
31,673
28,078
50,593
57,282
4
Condensed Consolidated Statements of Changes in Stockholders’ Equity (unaudited)
For the three months ended June 30, 2026
CommonStock
AdditionalPaid-In-Capital
RetainedEarnings
DeferredCompensation
AccumulatedOtherComprehensiveIncome (Loss)
TreasuryStock
Total
March 31, 2026
111,231
614,974
483,886
(205
(108,708
(24,552
1,076,626
Other comprehensive income, net of tax
Dividends on common stock ($.25 per share)
7
(6,623
(6,616
Issuance of 600 restricted common shares pursuant to 2017 stock incentive plan, net of forfeitures
27
29
Issuance of 6,489 common shares pursuant to the employee stock purchase plan
26
189
215
Purchase of 21,872 treasury shares
(921
(193
(4
Grant of restricted stock units pursuant to the 2017 stock incentive plan
(23
Vested restricted shares/units compensation expense
58
707
765
5
For the three months ended June 30, 2025
March 31, 2025
100,602
515,975
411,633
509
(135,350
(22,420
870,949
Other comprehensive income, net tax
Cash dividends on common stock (.24/share)
(5,729
Forfeiture of 150 restricted shares pursuant to the 2017 stock incentive plan
(6
Issuance of 7,079 common shares pursuant to the employee stock purchase plan
182
210
Grant of restricted units pursuant to 2017 stock incentive plan
279
(47
(225
(272
65
566
631
June 30, 2025
100,630
516,495
429,342
1,028
(130,710
(22,645
894,140
For the six months ended June 30, 2026
AccumulatedOtherComprehensiveLoss
Other comprehensive loss, net of tax
Dividends on common stock ($.50 per share)
(12,607
(12,600
Issuance of 82,513 restricted common shares pursuant to 2017 stock incentive plan, net of forfeitures
330
3,268
3,598
Issuance of 6,975 common shares pursuant to 2017 stock incentive plan, net of forfeitures
276
304
Issuance of 13,464 common shares pursuant to the employee stock purchase plan
54
383
437
Issuance of 2,539,831 common shares pursuant to acquisition of Two Rivers Financial Group, Inc.
10,159
93,999
104,158
Purchase of 34,558 treasury shares
(1,421
(3,374
(369
(3,743
2,276
Release of restricted stock units pursuant to 2017 stock incentive plan
(2,070
109
1,411
1,520
For the six months ended June 30, 2025
December 31, 2024
100,258
512,810
395,189
2,756
(142,383
(22,239
846,391
Cash dividends on common stock (0.48/share)
(11,456
Issuance of 73,468 restricted shares pursuant to 2017 stock incentive plan, net of forfeitures
294
2,569
2,863
Issuance of 5,600 common shares pursuant to 2017 stock incentive plan
22
196
Issuance of 13,970 common shares pursuant to the employee stock purchase plan
56
370
426
(2,826
(406
(3,232
2,070
Release of restricted units pursuant to 2017 stock incentive plan
(1,634
114
1,098
1,212
Condensed Consolidated Statements of Cash Flows (unaudited)
Six months ended June 30,
Cash flows from operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion, net
11,068
9,864
Change in cash surrender value of bank owned life insurance
(2,792
(2,406
Gain on death benefit paid from bank owned life insurance
(92
(487
Stock-based compensation expense
1,680
1,359
Operating lease payments
(1,760
(1,639
Loss (gain) on sale of investment securities, net
(83
181
Loss on sales and write-downs of other real estate owned, net
99
88
Loss (gain) on sale of premises and equipment
(10
79
Gain on sale of loans held for sale, net
(2,099
(1,676
Loss on repayment of subordinated debt
94
289
Gain on repayment of other borrowings
(85
Decrease in accrued interest receivable
1,081
638
Increase in accrued interest payable
943
1,635
Origination of loans held for sale
(79,080
(74,148
Proceeds from sale of loans held for sale
78,098
75,079
Decrease (increase) in other assets
(8,098
2,232
Decrease in other liabilities
(5,904
(5,200
Net cash provided by operating activities
51,404
55,631
Cash flows from investing activities:
Proceeds from maturities of certificates of deposits
1,290
1,470
Purchases of certificates of deposits
(4,120
Proceeds from sales of investment securities available-for-sale
167,867
8,291
Proceeds from maturities of investment securities available-for-sale
48,994
60,018
Purchases of investment securities available-for-sale
(256,089
(67,737
Purchase of investment securities held-to-maturity
(12
(38
Net increase in loans
(53,738
(97,005
Proceeds from sale of equity securities
1,199
Purchases of premises and equipment
(3,713
Proceeds from sale of premises and equipment
20
3,718
Proceeds from sales of other real property owned, net
458
Proceeds from bank owned life insurance death benefit
1,414
Purchase of other investments
(2,015
Net cash provided by acquisition
88,269
Net cash used in investing activities
(11,699
(93,124
Cash flows from financing activities:
Net increase in deposits
135,478
133,103
Increase (decrease) in repurchase agreements with customers
275
(10,181
Proceeds from other borrowings
70,000
125,000
Repayment of other borrowings
(155,745
(122,435
Proceeds from short-term debt
4,000
Repayment of short-term debt
(4,000
Repayment of subordinated debt
(27,500
(8,381
Proceeds from issuance of common stock
741
644
Purchase of treasury stock
Dividends paid on common stock
Net cash provided by financing activities
9,228
106,294
Increase in cash and cash equivalents
48,933
68,801
Cash and cash equivalents at beginning of period
121,216
Cash and cash equivalents at end of period
190,017
9
Supplemental disclosures of cash flow information
Cash paid (received) during the period for:
Interest
63,385
56,244
Income taxes, net of refunds
US Federal
15,975
4,861
State of Illinois
4,394
2,496
State of Missouri
200
385
State of Wisconsin
190
265
Other
292
126
Total income taxes, net of refunds
21,051
8,133
Supplemental disclosures of noncash investing and financing activities
Loans transferred to other real estate owned
2,399
Fixed assets transferred to other real estate owned
950
Initial recognition of right-of-use assets in exchange for lease liabilities
85
713
Supplemental disclosures for purchases of capital stock
Fair value of assets acquired
1,185,984
Consideration paid:
Cash paid
Common stock issued
Total consideration paid
104,161
Fair value of liabilities assumed
1,081,823
10
Note 1 -- Basis of Accounting and Consolidation
The unaudited condensed consolidated financial statements include the accounts of First Mid Bancshares, Inc. (“Company”) and its wholly owned subsidiaries: First Mid Bank & Trust, N.A. (“First Mid Bank”), First Mid Wealth Management Company (“First Mid Wealth Management”), First Mid Insurance Group, Inc. (“First Mid Insurance”), and First Mid Captive, Inc. (“the Captive”). All significant intercompany balances and transactions have been eliminated in consolidation. The financial information reflects all adjustments which, in the opinion of management, are necessary for a fair presentation of the results of the interim periods ended June 30, 2026 and 2025, and all such adjustments are of a normal recurring nature. Certain amounts in the prior year’s consolidated financial statements may have been reclassified to conform to the June 30, 2026 presentation and there was no impact on net income or stockholders’ equity. The results of the interim period ended June 30, 2026 are not necessarily indicative of the results expected for the year-ending December 31, 2026. The 2025 year-end consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America.
The unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X and do not include all the information required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements and related footnote disclosures, although the Company believes that the disclosures made are adequate to make the information not misleading. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2025 Annual Report on Form 10-K.
Acquisitions
Downs Insurance Agency, Inc. During the quarter ended March 31, 2026, Downs Insurance Agency, Inc. (“DIA”) customer list was acquired by the Company for a purchase price of $1.4 million.
Two Rivers Financial Group, Inc. On October 29, 2025, the Company and Star Sub LLC, a newly formed Iowa limited liability company and wholly-owned subsidiary of the Company, entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Two Rivers Financial Group, Inc., an Iowa corporation (“Two Rivers”), pursuant to which, among other things, the Company agreed to acquire 100% of the issued and outstanding shares of Two Rivers pursuant to a business combination whereby Two Rivers would merge with and into Star Sub LLC, whereupon the separate corporate existence of Two Rivers would cease and Star Sub LLC would continue as a surviving company and a wholly-owned subsidiary of the Company (the “Merger”).
Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger, each share of common stock of Two Rivers issued and outstanding immediately prior to the effective time of the Merger (other than shares held in treasury by Two Rivers) was converted into and became the right to receive 1.225 shares of common stock of the Company, and cash-in-lieu of fractional shares, less any applicable taxes required to be withheld, and subject to certain potential adjustments. On an aggregate basis, the total consideration payable by the Company at the closing of the Merger to Two Rivers shareholders and equity award holders was 2,539,831 shares of the Company common stock valued at $104.2 million and $3,000 of cash-in-lieu of fractional shares.
Two Rivers Bank was merged with and into First Mid Bank in June 2026 at which time, Two Rivers Bank offices became branches of First Mid Bank.
Ray Farm Management During the quarter ended December 31, 2025, Ray Farm Management Services, Inc.’s (“RFMS”) customer list was acquired by the Company for a purchase price of $764,000.
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.
Mid Rivers Insurance Group, Inc. During the quarter ended September 30, 2024, Mid Rivers Insurance Group, Inc. (“MRIG”) was acquired by the Company for a purchase price of $10.1 million and immediately merged into First Mid Insurance Group.
Notes 5 and 8 provide further information on the intangibles acquired in the above acquisitions.
11
Summary of Significant Accounting Policies
Segment Reporting
The Company operates as a single segment entity for financial reporting purposes. The Chief Financial and Risk Officer, Jordan Read (CFO), serves as the Company’s chief operating decision maker (CODM). The CODM allocates resources and assesses performance of the Company based on the consolidated performance, excluding all significant intercompany balances and transactions, of the Company and its wholly owned subsidiaries and does not significantly utilize disaggregated segment financial information for decision-making and resource allocation. As of June 30, 2026, management has reviewed the requirements of generally accepted accounting principles and has determined that no additional segment disclosures are required. Specifically,
Based on this assessment the Company’s financial statement disclosures fully comply with generally accepted accounting principles, and no additional qualitative segment disclosures are necessary.
The components of accumulated other comprehensive loss included in stockholders’ equity as of June 30, 2026 and December 31, 2025 are as follows (in thousands):
Unrealized Losses on Securities
Net unrealized losses on securities available-for-sale
(143,861
Tax benefit
39,037
Balance at June 30, 2026
(138,930
37,629
Balance at December 31, 2025
Amounts reclassified from accumulated other comprehensive income (loss) and the affected line items in the statements of income during the three and six months ended June 30, 2026 and 2025, were as follows (in thousands):
Amounts Reclassified from Other Comprehensive Income (Loss)
Affected Line Item in the
Statements of Income
Realized gain (loss) on available-for-sale securities, net
Investment securities gains (losses), net (total reclassified amount before tax)
Income tax benefit (expense)
(17
50
Total reclassifications out of accumulated other comprehensive income (loss)
Net reclassified amount
See “Note 3 – Investment Securities” for more detailed information regarding unrealized losses on available-for-sale securities.
12
In November 2024, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2024-03 “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” to require additional disclosures within the notes to the financial statements about certain expense items. Specifically, disaggregation of income statement captions that contain expenses within the following five categories is required: (1) purchases of inventory, (2) employee compensation, (3) depreciation, (4) intangible asset amortization, and (5) depreciation, depletion, and amortization (“DD&A”) costs recognized as part of oil- and gas-producing activities or other amounts of depletion expense. Further, this update requires disclosure of the total amount of selling expenses and the Company’s definition of selling expenses. This update provides a practical expedient for banks and bank holding companies to continue presenting salaries and employee benefits in conformity with SEC Rule 210.9-04 instead of requiring those entities to apply the employee compensation definition included in Subtopic 220-40. The amendments in this update may be applied on either a prospective or retrospective basis and will be effective for the Company beginning with the annual reporting period ending December 31, 2027, and interim reporting periods beginning January 1, 2028. The Company does not expect adoption of this ASU to have any impact on its financial position or results of operations because it only results in additional disclosures.
In November 2025, the FASB published ASU 2025-08, Financial Instruments Credit Losses (Topic 326): Purchased Loans (ASU 2025-08). The update was published with the intent to eliminate the current expected credit loss (CECL) “double count” on non-Purchase Credit Deteriorated (PCD) Loans. The update accomplishes this through using “gross up” methodology that is similar to the methodology used on PCD Loans. In the new method all “purchased seasoned loans” are grossed up for the Allowance of Credit Losses (ACL) expected on the loans. Purchased seasoned loans are defined as either:
The Company adopted this standard as of January 1, 2026.
Basic net income per common share available to common stockholders is calculated as net income less preferred stock dividends divided by the weighted average number of common shares outstanding. Diluted net income per common share available to common stockholders is computed using the weighted average number of common shares outstanding, increased by the assumed conversion of the Company’s convertible preferred stock and the Company’s stock options and restricted stock awarded, unless anti-dilutive.
13
The components of basic and diluted net income per common share available to common stockholders for the three and six months ended June 30, 2026 and 2025 were as follows:
Basic net income per common share available to common stockholders:
Net income available to common stockholders
27,789,000
23,438,000
54,116,000
45,609,000
Weighted average common shares outstanding
26,458,805
23,867,592
25,622,671
23,863,229
Basic earnings per common share
Diluted net income per common share available to common stockholders:
Dilutive potential common shares:
Restricted stock awarded
145,979
121,382
131,348
110,954
Diluted weighted average common shares outstanding
26,604,784
23,988,974
25,754,019
23,974,183
Diluted earnings per common share
There were no shares not considered in computing diluted earnings per share for the three and six months ended June 30, 2026 and 2025.
The amortized cost, gross unrealized gains and losses and estimated fair values for available-for-sale and held-to-maturity securities by major security type at June 30, 2026 and December 31, 2025 were as follows (in thousands):
AmortizedCost
GrossUnrealizedGains
GrossUnrealized(Losses)
Fair Value
Available-for-sale:
U.S. Treasury securities and obligations of U.S. government corporations and agencies
152,514
(10,147
142,367
Obligations of states and political subdivisions
331,621
273
(44,882
287,012
Mortgage-backed securities (1)
911,281
788
(89,248
822,821
Corporate bonded debt
28,553
(656
27,908
Total available-for-sale
1,423,969
1,072
(144,933
Held-to-maturity:
Other securities
153,859
(9,782
144,080
327,950
341
(47,658
280,633
705,728
2,458
(83,520
624,666
28,276
(772
27,504
1,215,813
2,802
(141,732
(1) Mortgage-backed securities include mortgage-backed securities (MBS) and collateralized mortgage obligation (CMO) issues from the following government sponsored enterprises: FHLMC, FNMA, GNMA and FHLB.
14
The Company also had $3.6 million and $4.6 million of equity securities, at fair value, as of June 30, 2026 and December 31, 2025, respectively. Investment securities carried at approximately $519.9 million and $473.8 million at June 30, 2026 and December 31, 2025, respectively, were pledged to secure public deposits and repurchase agreements and for other purposes as permitted or required by law. 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 June 30, 2026, the Company did not record an allowance for credit losses on its held-to-maturity securities.
Proceeds from sales of available-for-sale investment securities, realized gains and losses and income tax expense were as follows during the three and six months ended June 30, 2026 and 2025 (in thousands):
Proceeds from sales
Gross gains
Gross losses
The following table presents the aging of gross unrealized losses and fair value by investment category as of June 30, 2026 and December 31, 2025 (in thousands):
Less than 12 months
12 months or more
FairValue
UnrealizedLosses
142,366
24,881
(189
231,589
(44,693
256,470
279,235
(4,803
449,575
(84,445
728,810
3,971
(29
16,176
(627
20,147
308,087
(5,021
839,706
(139,912
1,147,793
142,833
5,923
(8
246,076
(47,650
251,999
11,327
(102
480,583
(83,418
491,910
3,967
(33
19,203
(739
23,170
21,217
(143
888,695
(141,589
909,912
At June 30, 2026, there were four hundred fifty-nine available-for-sale securities with a fair value of $839.7 million and unrealized losses of $139.9 million in a continuous unrealized loss position for twelve months or more. At December 31, 2025, there were four hundred eighty-eight available-for-sale securities with a fair value of $888.7 million and unrealized losses of $141.6 million in a continuous unrealized loss position for twelve months or more.
At June 30, 2026 and December 31, 2025, there were no held-to-maturity securities in a continuous unrealized loss position for twelve months or more.
The Company does not consider available-for-sale securities with unrealized losses at June 30, 2026, to be experiencing credit losses and recognized no resulting allowance for credit losses. The Company does not intend to sell a significant amount of the investments unless they are acquired and subsequently marked to fair value, and it is more likely than not that the Company will not be required to
15
sell these investments before recovery of the amortized cost basis, which may be the maturity dates of the securities. The unrealized losses occurred as a result of changes in interest rates, market spreads, and market conditions after purchase.
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 June 30, 2026 and December 31, 2025 follows (in thousands):
Construction and land development
365,391
361,678
Agricultural real estate
426,862
374,143
1-4 family residential properties
745,595
494,258
Multifamily residential properties
392,124
340,324
Commercial real estate
2,945,516
2,582,404
Loans secured by real estate
4,875,488
4,152,807
Agricultural loans
356,169
307,290
Commercial and industrial loans
1,506,339
1,385,421
Consumer loans
35,552
32,109
All other loans
207,162
161,604
Total gross loans
6,980,710
6,039,231
Less: loans held for sale
Total gross loans held for investment
6,973,986
6,034,028
Less:
Net deferred loan fees, premiums, and discounts
46,368
27,857
Allowance for credit losses
86,989
74,875
Net loans increased $909.3 million as of June 30, 2026 compared to December 31, 2025. The increase was primarily due to the acquisition of $860.5 million of net loans that were acquired in the Two Rivers acquisition. 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 $37.3 million and $35.1 million at June 30, 2026 and December 31, 2025, respectively.
The structure of the Company’s loan approval process is based on progressively larger lending authorities granted to individual loan officers, loan committees, and ultimately the board of directors. Outstanding balances to one borrower or affiliated borrowers are limited by federal regulation; however, limits well below the regulatory thresholds are generally observed. The vast majority of the Company’s loans are to businesses located in the geographic market areas served by the Company’s branch network. Additionally, a significant portion of the collateral securing the loans in the portfolio is located within the Company’s primary geographic footprint. In general, the Company adheres to loan underwriting standards consistent with industry guidelines for all loan segments.
The Company’s lending can be summarized into the following primary areas:
Commercial Real Estate Loans. Commercial real estate loans are generally comprised of loans to small business entities to purchase or expand structures in which the business operations are housed, loans to owners of real estate who lease space to non-related commercial entities, loans for construction and land development, loans to hotel and motel operators, and loans to owners of multifamily residential structures, such as apartment buildings. Commercial real estate loans are underwritten based on historical and projected cash flows of the borrower and secondarily on the underlying real estate pledged as collateral on the debt. For the various types of commercial real estate loans, minimum criteria have been established within the Company’s loan policy regarding debt service coverage while maximum limits on loan-to-value and amortization periods have been defined. Maximum loan-to-value ratios range from 65% to 85% depending upon the type of real estate collateral, while the desired minimum debt coverage ratio is 1.20x to 1.35x. Amortization periods for commercial real estate loans are generally limited to twenty to thirty years, depending on the collateral type and loan-to-value. The Company’s commercial real estate portfolio is below the threshold of 300 percent of the Company's total capital that would designate a concentration in commercial real estate lending, as established by the federal banking regulators.
16
The following table represents the gross commercial real estate loans by property type as of June 30, 2026 (in thousands):
Owner occupied
842,439
747,512
Non-owner occupied
Shopping centers and malls
269,430
264,961
Industrial and warehouse
237,211
237,522
Hotels and motels
214,330
218,073
Office
191,607
160,524
Skilled nursing facility
178,026
187,875
Assisted living facility
175,232
170,733
Acquired loans not yet classified
147,127
Retail
142,510
112,169
RV parks and campgrounds
99,062
104,267
Other property types
448,542
378,768
Total commercial real estate
Commercial and Industrial Loans. Commercial and industrial loans are primarily comprised of working capital loans used to purchase inventory and fund accounts receivable that are secured by business assets other than real estate. These loans are generally written for one year or less. Also, equipment financing is provided to businesses with these loans generally limited to 80% of the value of the collateral and amortization periods limited to seven years. Commercial loans are often accompanied by a personal guaranty of the principal owners of a business. Like commercial real estate loans, the underlying cash flow of the business is the primary consideration in the underwriting process. The financial condition of commercial borrowers is monitored at least annually with the type of financial information required to be determined by the size of the relationship. Measures employed by the Company for businesses with higher risk profiles include the use of government-assisted lending programs through the Small Business Administration and U.S. Department of Agriculture.
Agricultural and Agricultural Real Estate Loans. Agricultural loans are generally comprised of seasonal operating lines to grain farmers to plant and harvest corn and soybeans, term loans to fund the purchase of equipment, and the Company's Direct Merchant Finance product to fund crop inputs, primarily seed. Agricultural real estate loans are primarily comprised of loans for the purchase of farmland. Specific underwriting standards have been established for agricultural-related loans including the establishment of projections for each operating year based on industry developed estimates of farm input costs and expected commodity yields and prices. Operating lines are typically written for one year and secured by the crop. The Direct Merchant Finance loans are typically written for one year and are generally unsecured. Loan-to-value ratios on loans secured by farmland generally do not exceed 80% and have amortization periods ranging from twenty-five to thirty years depending on the loan-to-value. Federal government-assistance lending programs through the Farm Service Agency are used to mitigate the level of credit risk when deemed appropriate.
Residential Real Estate Loans. Residential real estate loans generally include loans for the purchase or refinance of residential real estate properties consisting of one-to-four units and home equity loans and lines of credit. The Company sells most of its long-term fixed rate residential real estate loans to secondary market investors. The Company also releases the servicing of these loans upon sale. Residential real estate loans are typically underwritten to conform to industry standards including criteria for maximum debt-to-income and loan-to-value ratios as well as minimum credit scores. Loans secured by first liens on residential real estate held in the portfolio typically do not exceed 80% of the value of the collateral and have amortization periods of twenty-five years or less. The Company does not originate subprime mortgage loans.
Consumer Loans. Consumer loans are primarily comprised of loans to individuals for personal and household purposes such as the purchase of an automobile or other living expenses. Minimum underwriting criteria have been established that consider credit score, debt-to-income ratio, employment history, and collateral coverage. Typically, consumer loans are set up on monthly payments with amortization periods based on the type and age of the collateral.
Construction and land development loans. Construction and land development loans are generally comprised of loans of all sizes, across many different industries, and can include properties for commercial businesses or land development or for residential use such as multifamily properties. Commercial and land development loans are underwritten based on historical and projected cash flows of the borrower and secondarily on the underlying real estate pledged as collateral on the debt. Construction and land development loans include unique risks that require enhanced diligence by lending personnel. For these loans, documentation requirements have been established within policy, and a specific checklist is followed. Additionally, based on the type of construction loan, the policy is also followed to designate the construction and land development loans as high-volatility commercial real estate if the loan meets the
17
criteria. To ensure consistent construction loan monitoring, loans greater than $2 million must be monitored by the Bank’s construction monitoring staff.
The policy also establishes maximum loan-to-value/amortizations, terms, construction periods, cash investments, pre-sale/lease, and other requirements and are specific to the type of property including non-farm, non-residential secured loans as well as multifamily, 1-4 family non-owner occupied, land acquisition/development/vacant lot acquisition, and raw land. Maximum loan-to-value ratios range from 65% to 80% depending upon the type of real estate collateral. Amortization periods for construction and land development loans are generally limited to twenty to thirty years, depending on the collateral type and loan-to-value. The Company’s construction and land development portfolio is below the threshold of 100 percent of the Company's total capital that would designate a concentration in construction and land development lending, as established by the federal banking regulators.
Other Loans. Other loans consist primarily of loans to municipalities to support community projects such as infrastructure improvements or equipment purchases. Underwriting guidelines for these loans are consistent with those established for commercial loans with the additional repayment source of the taxing authority of the municipality.
The allowance for credit losses represents the Company’s best estimate of the reserve necessary to adequately account for probable losses expected over the remaining contractual life of the assets. The provision for credit losses is the charge against current earnings that is determined by the Company as the amount needed to maintain an adequate allowance for credit losses. In determining the adequacy of the allowance for credit losses, and therefore the provision to be charged to current earnings, the Company relies predominantly on a disciplined credit review and approval process that extends to the full range of the Company’s credit exposure. The review process is directed by the overall lending policy and is intended to identify, at the earliest possible stage, borrowers who might be facing financial difficulty. Factors considered by the Company in evaluating the overall adequacy of the allowance include historical net credit losses, the level and composition of nonaccrual, past due and modified loans, trends in volumes and terms of loans, effects of changes in risk selection and underwriting standards or lending practices, lending staff changes, concentrations of credit, industry conditions and the current economic conditions in the region where the Company operates. The Company estimates the appropriate level of allowance for credit losses by evaluating large substandard, and large impaired loans separately from other loans.
The Company individually evaluates certain loans to estimate expected credit losses. Loans are individually evaluated for expected credit losses when their principal balance exceeds $250,000, and they are in nonaccrual status, their risk rating assigned is Substandard and their principal balances exceeds $5 million, or they are designated as having a modification or probable of being foreclosed. For loans that allowance for credit loss is individually measured each quarter one of three alternatives is used: (1) the present value of expected future cash flows discounted at the loan’s effective interest rate; (2) the loan’s observable market price, if available; or (3) the fair value of the collateral less costs to sell for collateral dependent loans and loans for which foreclosure is deemed to be probable. A specific allowance is assigned when expected cash flows or collateral are less than the carrying amount of the loan. The carrying value of the loan reflects reductions from prior charge-offs.
Non-individually evaluated loans comprise the vast majority of the Company’s total loan portfolio and include all loans not mentioned above in the individually evaluated loans section. A small portion of these loans are considered “criticized” due to the risk rating assigned reflecting elevated credit risk due to characteristics, such as a strained cash flow position, associated with the individual borrowers. Criticized loans are those assigned risk ratings of Special Mention, Substandard, or Doubtful.
The Company first bifurcates the loan portfolio into segments that share risk characteristics and then utilizes a discounted cash flow (DCF) method to measure the ACL on loans collectively evaluated that are sub-segmented by credit risk levels. The DCF method incorporates assumptions for probability of default, loss given default, prepayments, and curtailments over the contractual term of the loans. In determining the probability of default, the Company utilized regression analysis that includes the use of peer data to determine certain economic factors that are relevant loss drivers in the portfolio segments based on historical evaluations. National 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.
18
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 decreased for the period due to past due levels decreasing.
Agricultural Real Estate Loans. Historical losses in the segment remain very low. Farmland values have increased over an extended period of time. While values have declined slightly from their peak, values have held up well overall. This continues to drive low loan to values in this segment. The qualitative factors for this segment were unchanged during the quarter.
Residential Real Estate Non-Owner Occupied Loans. The loan segment increased in the first quarter of 2026 with the addition of the Two Rivers Bank loan portfolio. The qualitative factors for this segment were unchanged during the quarter.
Residential Real Estate Owner Occupied Loans. The loan segment increased in the first quarter of 2026 with the addition of the Two Rivers Bank loan portfolio. The qualitative factors for this segment decreased for the period due to lower past due levels.
HELOC Loans. These loans are a small segment to overall loan balances. There was no change to the qualitative factors for this segment during the year.
Commercial Real Estate Owner Occupied Loans. This segment has remained stable, reflecting less uncertainty to recessionary risks that were high in prior years with the rapid movement in interest rates and inflationary pressures. The quarter ended with higher past dues in this loan segment, which increased the qualitative factors.
Commercial Real Estate Non-Owner Occupied Loans. This segment includes the Company's largest balances. The qualitative factors for the quarter increased in this segment due to higher concentrations and macroeconomic factors.
Agricultural Loans. Losses in this segment include the Company's Direct Merchant Financing product, which inherently comes with higher overall risk of losses. Overall past dues in this segment decreased during the quarter and drove a lower qualitative factor adjustment, while additional qualitative factors were added due to continued pressures in the agricultural economy.
Commercial and Industrial Loans. Due to overall macroeconomic factors including “higher for longer” interest rates, additional qualitative factors were added for this segment during the quarter.
Consumer Loans. This segment is a small portion of the Company's loan portfolio. Historical net charge-offs have been immaterial in this segment. Qualitative factors decreased during the quarter due to an overall decline in past due levels.
19
The following table presents the balance in the allowance for credit losses and the recorded investment in loans based on portfolio segment and impairment method as of the three and six months ended June 30, 2026 (in thousands):
Constructionand LandDevelopment
AgriculturalReal Estate
1-4 Family Residential Properties
CommercialReal Estate
AgriculturalLoans
Commercialand Industrial
ConsumerLoans
Three months ended June 30, 2026
Beginning balance
4,940
1,415
5,943
41,619
2,663
1,681
86,814
Initial allowance on acquired loans with credit deterioration
Initial allowance on acquired purchased seasoned loans
Provision (release) for credit loss expense
(30
(125
(277
1,190
559
39
Loans charged off
(51
(2,115
(19
(322
(2,517
Recoveries collected
45
716
161
1,147
Ending balance
5,129
1,385
5,963
41,361
1,783
29,809
1,559
Six months ended June 30, 2026
1,283
3,753
35,589
1,401
26,285
1,435
Initial allowance on acquired loans with deterioration
441
188
1,767
543
3,019
545
124
1,952
3,593
1,361
7,822
(986
(42
(242
1,503
2,366
1,174
(40
(77
(1,121
(310
(820
(4,483
389
30
756
1,613
The following table presents the balance in the allowance for credit losses and the recorded investment in loans based on portfolio segment and impairment method as of the three and six months ended June 30, 2025 (in thousands):
CommercialandIndustrial
Three months ended June 30, 2025
1,292
3,544
32,214
1,649
26,028
1,593
70,051
335
(7
1,111
1,287
(203
(55
(70
(1,386
(489
(261
(2,261
134
217
282
167
803
4,066
1,322
3,616
33,258
25,618
1,513
71,160
Six months ended June 30, 2025
3,275
3,579
32,669
1,957
25,602
1,739
70,182
791
(39
(21
986
2,096
356
(94
(408
(2,503
(712
(4,344
152
372
351
1,103
Consistent with regulatory guidance, charge-offs on all loan segments are taken when specific loans, or portions thereof, are considered uncollectible. The Company’s policy is to promptly charge these loans off in the period where the uncollectible loss is reasonably determined. For all loan portfolio segments except 1-4 family residential properties and consumer, the Company promptly charges-off loans, or portions thereof, when available information confirms that specific loans are uncollectible based on information that includes, but is not limited to, (1) the deteriorating financial condition of the borrower, (2) declining collateral values, and/or (3)
legal action, including bankruptcy, that impairs the borrower’s ability to adequately meet its obligations. For impaired loans that are considered solely collateral dependent, a partial charge-off is recorded when a loss has been confirmed by an updated appraisal or other appropriate valuation of the collateral.
The Company charges off 1-4 family residential and consumer loans, or portions thereof, when the Company reasonably determines the amount of the loss. The Company adheres to time frames established by applicable regulatory guidance which provides for the charge-down of 1-4 family first and junior lien mortgages to the net realizable value less costs to sell when the loan is 180 days past due, charge-off of unsecured open-end loans when the loan is 180 days past due, and charge down to the net realizable value when other secured loans are 120 days past due. Loans at these respective delinquency thresholds for which the Company can clearly document that the loan is both well-secured and in the process of collection, such that collection will occur regardless of delinquency status, need not be charged off.
The following table presents the amortized cost basis of collateral-dependent loans by class of loans that were individually evaluated to determine expected credit losses, and the related allowance for credit losses, as of June 30, 2026 and December 31, 2025 (in thousands):
Collateral
Allowance for CreditLosses
Real Estate
BusinessAssets
5,724
412
26,097
244
30,041
62,106
579
22,760
7,665
7,694
358
Other loans
10,445
122
Total loans
40,870
103,005
1,064
111
600
371
30,208
31,290
7,123
7,152
392
11,184
84
18,307
49,626
489
The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, collateral support, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on a continuous basis. The Company uses the following definitions for risk ratings, which are commensurate with a loan considered “criticized”:
Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.
Substandard. Loans classified as substandard are inadequately protected by the current sound-worthiness and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.
21
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 June 30, 2026 (in thousands):
Term Loans by Origination Year
Revolving
Risk rating
2024
2023
2022
Prior
Construction and land development loans
Pass
80,817
110,481
120,411
3,766
11,239
28,970
355,684
Special mention
Substandard
3,200
307
2,222
5,734
123,611
4,073
11,244
31,522
361,748
Current period gross write-offs
Agricultural real estate loans
51,402
29,818
24,847
12,712
93,409
125,335
337,523
11,422
1,204
3,698
907
21,919
15,625
54,775
3,196
168
186
9,133
17,556
30,239
66,020
31,190
28,545
13,805
124,461
158,516
422,537
40
40,992
75,838
44,552
46,936
106,731
302,928
102,603
720,580
172
665
100
937
503
632
840
8,850
996
12,352
41,014
76,341
45,061
47,568
107,743
312,443
103,699
733,869
47
77
Commercial real estate loans
205,683
498,511
252,454
251,126
636,772
1,397,494
3,242,040
133
2,790
8,701
9,434
8,560
29,668
4,766
5,716
12,370
4,999
14,052
42,315
210,582
498,973
260,960
272,197
651,205
1,420,106
3,314,023
753
368
1,121
145,591
106,537
34,310
10,299
14,658
19,287
330,682
326
1,540
125
36
139
2,810
291
12,544
9,696
621
148
23,322
146,208
120,621
44,131
10,357
15,418
20,079
356,814
1,324
144
429
2,115
158,176
469,721
212,712
87,576
189,783
515,730
1,633,698
59
18,856
8,949
2,670
1,211
18,859
50,604
150
524
2,013
4,234
18,650
25,571
158,385
488,577
222,185
92,259
195,228
553,239
1,709,873
290
310
5,359
8,127
3,757
3,179
9,604
5,053
35,079
138
369
8,166
3,787
3,180
9,795
5,191
35,478
33
71
698
820
688,020
1,299,033
693,043
415,594
1,062,196
2,394,797
6,655,286
11,940
21,650
15,562
12,314
32,905
44,683
139,154
8,425
13,666
19,675
15,531
19,993
61,616
139,902
708,385
1,334,349
728,280
443,439
1,115,094
2,501,096
6,934,342
1,325
160
1,294
494
1,209
4,483
The following tables present the credit risk profile of the Company’s loan portfolio based on rating category and payment activity as of December 31, 2025 (in thousands):
2021
114,696
99,757
119,602
5,167
6,048
14,659
359,929
398
348
746
120,000
5,172
15,014
360,687
107
42,758
22,040
12,609
107,950
61,357
87,939
334,653
228
339
806
22,343
1,331
7,810
32,857
598
194
224
4,490
5,898
43,584
22,573
13,415
130,517
63,080
100,239
373,408
54,180
31,041
28,668
62,974
64,512
144,475
92,629
478,479
185
93
760
1,038
127
529
584
624
670
6,946
857
10,337
54,307
31,570
29,252
63,783
65,275
152,181
93,486
489,854
135
156
459,831
217,098
157,923
597,491
498,456
916,195
2,846,994
1,150
12,931
248
4,760
19,460
5,000
15,295
6,246
2,394
8,763
37,698
222,469
174,368
616,668
501,098
929,718
2,904,152
699
391
1,197
230,666
45,361
7,684
10,151
6,363
2,560
302,785
23
1,319
451
2,484
845
24
4,171
232,326
45,804
10,179
10,996
6,410
308,275
280
836
306
2,503
431,942
214,908
82,977
210,658
159,029
357,077
1,456,591
19,409
8,898
2,542
7,965
61
26,193
65,068
1,397
2,180
1,008
219
16,617
21,421
451,351
225,203
87,699
219,631
159,309
399,887
1,543,080
163
225
497
1,600
2,485
5,619
2,555
2,812
12,861
5,511
2,119
31,477
171
132
419
2,585
2,821
13,054
5,643
2,196
31,918
43
1,228
1,425
1,339,692
632,760
412,275
1,007,252
801,276
1,525,024
5,810,908
20,846
9,684
4,907
43,446
1,756
39,871
120,510
1,176
20,552
9,123
3,831
36,900
79,956
1,361,714
649,961
437,734
1,059,821
806,863
1,601,795
6,011,374
1,014
1,387
1,551
846
3,070
7,873
The following table presents the Company’s loan portfolio, on an amortized cost basis, aging analysis at June 30, 2026 and December 31, 2025 (in thousands):
30-59 Days Past Due
60-89 Days Past Due
90 Days or MorePast Due
Total Past Due
Current
Total LoansReceivable
Total Loans> 90 Days andAccruing
2,183
359,565
78
1,148
1,226
421,311
515
2,431
2,345
5,291
728,578
105
390,742
390,847
3,101
209
8,463
11,773
2,911,403
2,923,176
3,694
2,640
14,244
20,578
4,811,599
4,832,177
37
328
356,486
97
1,892
4,059
1,498,892
1,502,951
149
89
283
35,195
206,922
6,204
16,181
25,248
6,909,094
Percent of total loans
0.36
%
841
372,567
4,725
1,630
1,687
8,042
481,812
339,482
712
5,671
6,611
2,558,059
2,564,670
5,437
8,199
15,494
4,112,607
4,128,101
308,256
414
205
904
1,523
1,380,075
1,381,598
329
44
484
31,434
161,482
6,180
2,126
9,214
17,520
5,993,854
0.29
Within all loan portfolio segments, loans are expected to incur credit losses when, based on current information and events, it is probable the Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. The entire balance of a loan is considered delinquent if the minimum payment contractually required to be made is not received by the specified due date. Impaired loans, excluding certain modified loans, are placed on nonaccrual status. Impaired loans include nonaccrual loans and loans modified in restructuring where concessions have been granted to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection. It is the Company’s policy to have any restructured loans which are on nonaccrual status prior to being modified remain on nonaccrual status until, in the opinion of management, the financial position of the borrower indicates there is no longer any reasonable doubt as to the timely collection of interest or principal. If the restructured loan is on accrual status prior to being modified, the loan is reviewed to determine if the modified loan should remain on accrual status.
The Company’s policy is to discontinue the accrual of interest income on all loans for which principal or interest is ninety days past due. The accrual of interest is discontinued earlier when, in the opinion of management, there is reasonable doubt as to the timely collection of interest or principal. Once interest accruals are discontinued, accrued but uncollected interest is charged against current year's income. Subsequent receipts on nonaccrual loans are recorded as a reduction of principal, and interest income is recorded only after principal recovery is reasonably assured. Interest on loans determined to be modified is recognized on an accrual basis in accordance with the restructured terms if the loan is in compliance with the modified terms. Nonaccrual loans are returned to accrual status when, in the opinion of management, the financial position of the borrower indicates there is no longer any reasonable doubt as to the timely collection of interest or principal. The Company requires a period of satisfactory performance of not less than six months before returning a nonaccrual loan to accrual status.
The amount of interest income recognized by the Company within the periods stated above was due to loans modified in restructuring that remain on accrual status.
The following table presents the Company’s recorded balance of nonaccrual loans as of June 30, 2026 and December 31, 2025 (in thousands). This table excludes performing purchased credit deteriorated loans and performing loans modified.
Nonaccrualwith noAllowance for
Credit Loss
Nonaccrual
1,423
2,930
4,306
1,181
7,636
9,405
5,763
11,020
11,329
10,109
10,381
21,691
26,568
16,606
17,701
2,249
3,250
1,232
1,967
141
1,461
10,446
1,942
25,566
40,429
19,981
31,053
The aggregate principal balances of nonaccrual, past due ninety days or more loans were $40.4 million and $31.1 million at June 30, 2026 and December 31, 2025, respectively. Interest income that would have been recorded under the original terms of such nonaccrual loans totaled $1.8 million and $662,000 for the six months ended June 30, 2026 and 2025, respectively.
The following table shows the amortized cost of loans at June 30, 2026 and 2025 that were both experiencing financial difficulty and modified segregated by portfolio segment and type of modification. The percentage of the amortized cost of loans that were modified to borrowers in financial distress as compared to outstanding loans is also presented below.
Payment
Term
Class of
Delay
Extension
Rate
Financing
Investment
Modifications
Reduction
Receivable
0.02
546
505
828
0.04
418
1,907
0.03
1,246
2,946
0.07
296
0.01
736
792
130
1,128
866
831
81
1,959
953
0.06
25
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 June 30, 2026 and 2025.
30-59 DaysPast Due
60-89 DaysPast Due
Total PastDue
The following table shows the financial effect of loan modifications during the three and six months ended June 30, 2026 and 2025 to borrowers experiencing financial difficulty.
Weighted Average
Interest Rate
Term Extension
(in months)
1.00
A loan is considered to be in payment default once it is 90 days past due under the modified terms. During the three months ended June 30, 2026 and 2025, there were four and zero loans modified that experienced payment defaults, respectively. During the six months ended June 30, 2026 and 2025, there were five and four loans modified that experienced payment defaults, respectively.
At June 30, 2026 and December 31, 2025, the balance of real estate owned included $5.8 million and $2.9 million respectively of foreclosed real estate properties recorded as a result of obtaining physical possession of the property. At June 30, 2026 and December 31, 2025, the recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceeds were in process were $3.2 million and $1.3 million, respectively.
The Company has goodwill from business combinations, identifiable intangible assets assigned to core deposit relationships and customer lists of business lines acquired. The following table presents gross carrying amount and accumulated amortization by major intangible asset class as of June 30, 2026 and December 31, 2025 (in thousands):
Gross CarryingValue
AccumulatedAmortization
Goodwill
207,364
3,760
207,151
Core deposit intangibles
101,185
58,396
79,945
53,285
Customer list intangibles
40,570
17,611
34,420
16,021
349,119
79,767
321,516
73,066
Core deposit intangibles are being amortized over a period of 10 years and other intangibles, primarily customer lists, are being amortized over periods ranging from 3 to 16 years.
During the quarter ended March 31, 2026, a customer list intangible asset of $1.4 million was recorded for the acquisition of DIA’s customer list in connection with its insurance business. The purchase consideration given to DIA matches the amount of intangible assets recorded.
Goodwill of $213,000 was recorded for the acquisition and merger of Two Rivers during the six months ended June 30, 2026. The goodwill will not be deductible for tax purposes. During the quarter ended June 30, 2026, the Company adjusted certain provisional
valuations recorded as of the acquisition date. Measurement-period adjustments related to premises and equipment, customer list intangibles, deferred tax assets, and accrued liabilities. These adjustments increased goodwill by $213,000. The following table summarizes the changes in provisional amounts recorded during the measurement period.
Assets Received or Liability Assumed
Effect to goodwill resulting from acquisition
Premises and equipment
10,976
11,743
767
12,890
12,889
(1
Customer list intangible
4,800
5,043
243
Deferred tax asset
10,398
10,191
(207
Accrued and other liabilities
5,576
6,165
589
213
In December 2025, a customer list intangible asset of $764,000 was recorded for the acquisition of RFMS customer list in connection with its farm management business. The purchase consideration given to RFMS matches the amount of intangible assets recorded.
During the quarter ended September 30, 2025, a customer list intangible asset of $2.8 million was recorded for the acquisition of a portion of AAIG's customer list in connection with its insurance business. The purchase consideration given to AAIG matches the amount of intangible assets recorded.
During the quarter ended September 30, 2024, goodwill of $6.9 million was recorded for the acquisition of the stock of Mid Rivers Insurance Group, Inc., in connection with its insurance business.
The following provides a reconciliation of the purchase price paid for Mid Rivers Insurance Group, Inc. and the amount of goodwill recorded (in thousands):
Unallocated purchase price
10,059
Less purchase accounting adjustments:
Insurance Company intangible
4,305
(1,176
Total purchase accounting adjustments
3,129
Resulting goodwill from acquisition
6,930
The unpaid principal balance of mortgage loans serviced for others was $483.0 million, $541.9 million, and $509.7 million as of June 30, 2026, June 30, 2025, and December 31, 2025, respectively. The Company has mortgage servicing rights acquired in previous acquisitions. Mortgage servicing rights are accounted for under the amortization method. The following table summarizes the activity pertaining to the mortgage servicing rights included in intangible assets as of six months ended June 30, 2026 and 2025 (in thousands):
4,566
5,629
Adjustment to valuation reserve
Mortgage servicing rights amortized
(478
(541
Interest only strip
4,104
5,081
Fair value of portfolio
5,754
6,310
Total amortization expense for three and six months ended June 30, 2026 and 2025 was as follows (in thousands):
2,849
2,186
5,111
4,449
681
1,590
1,362
Mortgage servicing rights
223
254
478
541
Estimated amortization expense for each of the five succeeding years is shown in the table below (in thousands):
Aggregate amortization expense:
For period 01/01/26-06/30/26
Estimated amortization expense:
For period 07/01/26-12/31/26
7,363
For year-ended 12/31/27
13,420
For year-ended 12/31/28
11,726
For year-ended 12/31/29
9,953
For year-ended 12/31/30
7,932
The weighted average amortization period for core deposit, customer lists and total intangibles was 3.40, 5.25, and 4.03 years respectively, at June 30, 2026.
In accordance with GAAP, the Company performed its annual testing of goodwill for impairment as of September 30, 2025 and determined that, as of that date, goodwill was not impaired. The goodwill of a reporting unit is tested for impairment between annual tests if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying amount. Management also concluded that the remaining amounts and amortization periods were appropriate for all intangible assets.
Securities sold under agreements to repurchase have overnight maturities and a weighted average rate of 2.05%.
The right of setoff for a repurchase agreement resembles a secured borrowing, whereby the collateral pledged by the Company would be used to settle the fair value of the repurchase agreement should the Company be in default (e.g., declare bankruptcy), the Company could cancel the repurchase agreement (i.e., cease payment of principal and interest), and attempt collection on the amount of collateral value in excess of the repurchase agreement fair value. The collateral is held by a third-party financial institution in the counterparty's custodial account. The counterparty has the right to sell or repledge the investment securities. For government entity repurchase agreements, the collateral is held by the Company in a segregated custodial account under a tri- party agreement. The Company is required by the counterparty to maintain adequate collateral levels. In the event the collateral fair value falls below stipulated levels, the Company will pledge additional securities. The Company closely monitors collateral levels to ensure adequate levels are maintained, while mitigating the potential of over-collateralization in the event of counterparty default.
Repurchase agreements by class of collateral pledged are as follows (in thousands):
US Treasury securities and obligations of U.S. government corporations and agencies
60,567
55,863
136,424
140,853
FHLB advances represent borrowings by First Mid Bank to fund loan demand. Advances were $170.0 million and $270.0 million at June 30, 2026 and December 31, 2025, respectively. At June 30, 2026, the advances were as follows:
Advance
Term (in years)
Maturity Date
25,000,000
3.0
4.37%
May 10, 2027
5.0
3.95%
June 29, 2028
3.93%
June 27, 2029
5,000,000
10.0
1.15%
October 3, 2029
1.12%
10,000,000
1.39%
December 31, 2029
3.46%
February 7, 2030
50,000,000
3.03%
May 27, 2036
170,000,000
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs. There is a hierarchy of three levels of inputs that may be used to measure fair value:
Level 1Valuations for assets and liabilities traded in active exchange markets, such as the New York Stock Exchange. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.
Level 2Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third party pricing services for identical or comparable assets or liabilities which use observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in active markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Following is a description of the inputs and valuation methodologies used for assets measured at fair value on a recurring basis and recognized in the accompanying balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy.
Available-for-Sale Securities. The fair value of available-for-sale securities is determined by various valuation methodologies. Where quoted market prices are available in an active market, securities are classified within Level 1. If quoted market prices are not available, then fair values are estimated by using quoted prices of securities with similar characteristics or independent asset pricing services and pricing models, the inputs of which are market-based or independently sources market parameters, including but not limited to, yield curves, interest rates, volatilities, prepayments, defaults, cumulative loss projections and cash flows. Such securities are classified in Level 2 of the valuation hierarchy. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.
Equity Securities. The fair value of current equity securities is determined by obtaining quoted market prices in an active market and are classified within Level 1. In cases where quoted market prices are not available, fair values are estimated by using quoted prices of securities with similar characteristics and are classified in Level 2 of the valuation hierarchy.
Derivatives. The fair value of derivatives is based on models using observable market data as of the measurement date and are therefore classified in Level 2 of the valuation hierarchy.
Loans Held for Sale. The fair values are estimated by using quoted prices of loans with similar characteristics and are therefore classified in Level 2 of the valuation hierarchy.
The following table presents the Company’s assets that are measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall as of June 30, 2026 and December 31, 2025 (in thousands):
Fair Value Measurements Using:
Quoted Prices inActive Marketsfor IdenticalAssets (Level 1)
SignificantOtherObservableInputs (Level 2)
SignificantUnobservableInputs(Level 3)
Available-for-sale securities:
Mortgage-backed securities
812,843
9,978
25,149
2,759
Total available-for-sale securities
1,267,371
12,737
Equity securities
Loans held for sale
Derivative assets: interest rate swaps
1,806
1,292,258
1,275,901
Derivative liabilities: interest rate swaps
1,480
24,745
1,074,124
1,728
1,088,402
1,081,055
1,247
The change in fair value of assets measured on a recurring basis using significant unobservable inputs (Level 3) for the years ended three and six months ended June 30, 2026 and 2025 is summarized as follows (in thousands):
10,234
5,759
Transfers out of Level 3
(7,475
Purchases, issuances, sales and settlements:
Purchases
7,029
17,453
Maturities
(3,000
9,788
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 expected credit losses. 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 June 30, 2026 was $24.6 million and a fair value of $23.4 million resulting in specific loss exposures of $1.2 million. As of December 31, 2025, the total carrying amount of loans for which a change in specific allowance occurred was $11.0 million. These loans had a fair value of $10.4 million which resulted in specific loss exposures of $605,000.
When there is little prospect of collecting principal or interest, loans, or portions of loans, may be charged off to the allowance for credit losses. Losses are recognized in the period an obligation becomes uncollectible. The recognition of a loss does not mean that the loan has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off the loan even though partial recovery may be affected in the future.
Foreclosed Assets Held for Sale.
Other real estate owned acquired through loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. The adjustment at the time of foreclosure is recorded through the allowance for credit losses. Due to the subjective nature of establishing fair value when the asset is acquired, the actual fair value of the other real estate owned or foreclosed asset could differ from the original estimate. If it is determined that fair value declines subsequent to foreclosure, a valuation allowance is recorded through non-interest expense. Operating costs associated with the assets after acquisition are also recorded as non-interest expense. Gains and losses on the disposition of other real estate owned and foreclosed assets are netted and posted to other non-interest expenses. The total carrying amount of other real estate owned as of June 30, 2026 was $5.8 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 $267,000. The total carrying amount of other real estate owned as of December 31, 2025 was $2.9 million. Other real estate owned included in the total carrying amount and measured at fair value on a nonrecurring basis during the year amounted to $605,000.
The following table presents the fair value measurement of assets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2026 and December 31, 2025 (in thousands):
Quoted Pricesin Active Markets for Identical Assets
SignificantOtherObservable Inputs
SignificantUnobservableInputs
(Level 1)
(Level 2)
(Level 3)
Collateral dependent loans
23,404
Foreclosed assets held for sale
267
10,389
605
31
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 June 30, 2026 and December 31, 2025.
Valuation
Range
(in thousands)
Technique
Unobservable Inputs
(Weighted Average)
$23,404
Third partyvaluations
Discount to reflect realizable value
0%-40%
(20%)
Discount to reflect realizable value less estimated selling costs
(35%)
$10,389
Third party valuations
0% - 40%
32
The following tables present estimated fair values of the Company’s financial instruments at June 30, 2026 and December 31, 2025 (in thousands):
CarryingAmount
Level 1
Level 2
Level 3
Financial assets
Cash and due from banks
303,777
Available-for-sale investment securities
Held-to-maturity investment securities
Equity investment securities
Loans net of allowance for credit losses
6,835,735
Federal Reserve Bank stock
22,980
Federal Home Loan Bank stock
9,729
Financial liabilities
Deposits
7,500,937
6,007,774
1,493,163
207,997
33,458
32,480
254,844
5,761,258
19,855
11,351
6,322,439
5,265,780
1,056,659
270,338
60,800
22,083
On February 28, 2026, the Company completed its acquisition of Two Rivers Financial Group, Inc. (“Two Rivers”) pursuant to an Agreement and Plan of Merger, dated October 29, 2025 (the “Merger Agreement”). Pursuant to the Merger Agreement, Two Rivers was merged with and into the Company. Two Rivers shareholders received 1.225 shares of the Company's common stock for each share of Two Rivers common stock.
The Company accounted for the Two Rivers acquisition as a business combination using the acquisition method of accounting in accordance with ASC 805, Business Combinations (“ASC 805”). ASC 805 requires assets purchased and liabilities assumed to be recorded at their respective fair values at the date of acquisition. The Company determined the fair value of loans, core deposit intangibles, time deposits, real property, jr. subordinated debt, a note payable, leases, FHLB borrowings and a customer list intangible with the assistance of third-party valuations and appraisals.
A preliminary summary of the fair value of assets received and liabilities assumed are as follows:
88,972
Loans, net
860,534
Investments-available for sale
169,780
FHLB stock
989
Accrued interest receivable
4,408
Prepaid expenses
954
Core deposit intangible
21,240
Total assets acquired
Liabilities
1,040,793
FHLB advance
5,308
Note payable
20,004
9,526
Accrued interest payable
829
Total liabilities assumed
1,082,036
Net assets acquired
103,948
Total consideration
The following table presents a summary of consideration transferred:
(In thousands, except shares)
Common stock issued (2,539,831 shares)
Cash consideration
Purchase price
The Company recorded $213,000 of goodwill in connection with the acquisition of Two Rivers. The amount of goodwill recorded reflects the synergies and operational efficiencies that are expected to result from the acquisition. The goodwill calculation is provisional for up to one year after the acquisition and could be adjusted in subsequent quarters during 2026 if additional relevant information to the fair values listed above become available. Adjustments made to the goodwill calculation are summarized in Note 5. The descriptions below describe the methods used to determine the fair value of significant assets acquired and liabilities assumed, as presented above:
Loans, net. The fair value of the loan portfolio was calculated on an individual loan basis using a discounted cash flow analysis, with results presented and assumptions applied on a summary basis. This analysis took into consideration the contractual terms of the loans and assumptions related to the cost of debt, cost of equity, servicing cost, and other liquidity/risk premium considerations to estimate the projected cash flows. The inputs and assumptions used in the fair value estimate of the loan portfolio include loss rates, discount rate, prepayment speed, and foreclosure lag. Cash flows were adjusted by estimating future credit losses and the rate of prepayments. Projected monthly cash flows were then discounted to present value using a risk-adjusted market rate for similar loans.
Premises and equipment. The fair value of the real estate acquired was determined by using third party real estate appraisers. The appraisals factored in the condition of the property and comparable sales of similar properties in similar markets. The appraisals allocated the value of each property between land and building and the properties were recorded at the appraised value on the balance sheet as of the date of the acquisition.
Core deposit intangible. The Company identified customer relationships, in the form of core deposit intangibles, as an identified intangible asset. Core deposit intangibles derive value from the expected future benefits or earnings capacity attributable to the acquired core deposits. The fair value of the core deposit intangible was estimated by identifying the expected future benefits of the core deposits and discounting those benefits back to present value. The core deposit intangible will be amortized over its estimated useful life of approximately 10 years using the sum of the months digits accelerated method.
Customer list intangible. The Company identified wealth management customer relationships, in the form of a customer list intangible, as an identified intangible asset. Customer list intangibles derive value from the expected future benefits or earnings capacity attributable to the acquired trust customer relationships. The fair value of the customer list intangible was estimated by identifying the expected future benefits of the customer relationships and discounting those benefits back to present value. The customer list intangible will be amortized over its estimated useful life of approximately 16 years using the straight-line method.
Deposits. The fair value of demand deposit and interest checking deposit accounts was assumed to approximate the carrying value as these accounts have no stated maturity and are payable on demand. The fair value of time deposits was estimated by discounting the contractual future cash flow using market rates offered for time deposits of similar remaining maturities.
FHLB borrowings, note payable, and jr. subordinated debt. The FHLB borrowings, note payable, and jr. subordinated debt was fair valued using an income approach. Cash flows were calculated using the instrument’s annualized contractual rate and discounted to present value using market rates for similar types of borrowing arrangements.
Accounting for acquired loans. Loans acquired are recorded at fair value with no carryover of the related allowance for credit losses. Purchased-credit deteriorated loans (“PCD”) are loans that have experienced more than insignificant credit deterioration since origination and are recorded at the purchase price. The allowance for credit losses is determined at the loan level. Non-PCD loans have not experienced a more than insignificant deterioration in credit quality since origination. Under ASU 2025-08, these loans are referred to as purchased seasoned loans and accounted for similarly to the PCD loans. PCD and purchased seasoned loan’s purchase price and the allowance for credit losses becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized into interest income over the life of the loan.
In accordance with ASC 326, Financial Instruments – Credit Losses, immediately following the acquisition the Company established a $10.8 million allowance for credit losses on the $896.2 million of acquired loans.
The following table provides a summary of loans purchased as part of the Two Rivers acquisition as of the acquisition date:
Unpaid principal balance
896,204
Allowance for credit losses at acquisition
(10,841
Non-credit discount on acquired loans
(24,786
Fair value of loans
860,577
35
The following unaudited pro forma condensed combined financial information presents the results of operations of the Company, including the effects of the purchase accounting adjustments and acquisition expenses, had the Two Rivers Merger taken place at the beginning of the period (dollars in thousands, except per share data):
73,328
156,900
141,870
3,284
5,133
Non-interest income
26,580
57,331
54,305
Non-interest expense
68,213
140,140
136,070
28,411
69,948
54,972
Income tax expense
6,122
16,295
11,555
22,289
53,653
43,417
Earnings per share
Basic
0.84
2.03
1.64
Diluted
2.02
Basic weighted average shares outstanding
26,407,423
26,469,281
26,403,060
Diluted weighted average shares outstanding
26,528,805
26,600,629
26,514,014
The Company's consolidated statement of income for the six months ended June 30, 2026 includes $19,865 of revenue and $3,377 of net income applicable to Two Rivers from the Two Rivers Merger date, February 28, 2026, until the merger of Two Rivers Bank and First Mid Bank on June 13, 2026.
Acquisition costs are expensed as incurred as a component of non-interest expense and primarily include, but are not limited to, severance costs, professional services, data processing fees, and marketing and advertising expenses. The Company incurred acquisition costs related to the Two Rivers acquisition, pre-tax, of $9.2 million during the six months ended June 30, 2026 and no related acquisition costs were incurred during the six months ended June 30, 2025.
The Company recognizes a lease liability and a right-of-use asset, based on the present value of lease payments over the lease term. The discount rate used in determining the present value is the Company's incremental borrowing rate which is the FHLB fixed advance rate based on the lease commencement date. In addition, the Company has elected not to include short-term leases (i.e., leases with terms of twelve months or less) or equipment leases (primarily copiers) deemed immaterial, on the consolidated balance sheets. The following table contains supplemental balance sheet information related to leases (dollars in thousands):
Operating lease right-of-use assets
Operating lease liabilities
Weighted-average remaining lease term (in years)
4.0
4.4
Weighted-average discount rate
3.57
3.54
Certain of the Company's leases contain options to renew the lease; however, not all renewal options are included in the calculation of lease liabilities as they are not reasonably certain to be exercised. The Company's leases do not contain residual value guarantees or material variable lease payments. The Company does not have any other material restrictions or covenants imposed by leases that would impact the Company's ability to pay dividends or cause the Company to incur additional financial obligations.
Future minimum lease payments under operating leases are (in thousands):
Year Ended December 31,
Operating Leases
1,835
2027
3,419
2028
2,753
2029
2,271
2030
1,541
Thereafter
2,748
Total minimum lease payments
14,567
Less imputed interest
(1,372
Total lease liabilities
The components of lease expense for the three and six months ended June 30, 2026 and 2025 were as follows (in thousands):
Operating lease cost
926
1,838
1,667
Short-term lease cost
Variable lease cost
247
255
420
Total lease cost
1,126
2,334
2,326
Income from subleases
(91
(162
(171
Net lease cost
1,127
1,035
2,172
2,155
As the Company elected not to separate lease and non-lease components, the variable lease cost primarily represents variable payment such as common area maintenance and copier expense. The Company does not have any material sub-lease agreements. In October 2025, the Company recognized a $630,000 gain on the sale of their branch location in St. Louis, MO and subsequently leased the property back from the buyer with a lease term ending on December 31, 2026. Cash paid for amounts included in the measurement of lease liabilities was (in thousands):
Operating cash flows used on operating leases
1,760
1,639
Note 10 -- Derivatives
The Company utilizes interest rate swaps, designated as fair value hedges, to mitigate the risk of changing interest rates on the fair value of fixed rate loans. For derivative instruments that are designed and qualify as a fair value hedge, the gain or loss on the derivative instrument, as well as the offsetting loss or gain in the hedged asset attributable to the hedged risk, is recognized in current earnings.
The following table provides the outstanding notional balances and fair value of outstanding derivatives designated as hedging instruments as of June 30, 2026 and December 31, 2025 (in thousands):
Derivative
Balance SheetLocation
Weighted AverageRemaining Maturity(Years)
NotionalAmount
EstimatedValue
Interest rate swap agreements
2.8
6,701
(1,480
3.3
11,974
(1,247
The effects of the fair value hedges on the Company's income statement during the three and six months ended June 30, 2026 and 2025 were as follows (in thousands):
Location of Gain (Loss) on Derivative
Interest income on loans
(153
(103
(154
(366
Location of Gain (Loss) on Hedged Items
153
103
154
366
The following amounts were recorded on the balance sheet related to the cumulative basis adjustment for fair value hedges as of June 30, 2026 and December 31, 2025 (in thousands):
Line Item in the Balance Sheet inWhich the Hedge Items are Included
Carrying Amount of the Hedged Assets
Cumulative Amount of Fair Value HedgingAdjustments Included in the CarryingAmount of the Hedged Assets
6,375
(327
11,493
(481
The following table provides the outstanding notional balances and fair value of outstanding derivatives not designated as hedging instruments as of the six months ended June 30, 2026 and December 31, 2025 (dollars in thousands):
2.9
23,897
27,233
481
Note 11 -- Regulatory Capital
The Company is subject to various regulatory capital requirements administered by the federal banking agencies. Bank holding companies follow minimum regulatory requirements established by the Board of Governors of the Federal Reserve System (“Federal Reserve System”), First Mid Bank follows similar minimum regulatory requirements established for national banks by the Office of the Comptroller of the Currency (“OCC”). Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary action by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements.
Quantitative measures established by regulatory capital standards to ensure capital adequacy require the Company and its subsidiary bank to maintain minimum capital amounts and ratios (set forth in the table below). Management believes that, as of June 30, 2026 and December 31, 2025, the Company and First Mid Bank met all capital adequacy requirements.
As of December 31, 2025, 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 following table. At June 30, 2026, there were no conditions or events since the most recent notification that management believes has changed this categorization.
38
Actual
Required Minimum for Capital AdequacyPurposes with Capital Buffer
To Be Well-Capitalized Under PromptCorrective Action Provisions
(Dollars in thousands)
Amount
Ratio
Total capital (to risk-weighted assets)
Company
1,106,600
15.41
754,208
> 10.50%
N/A
First Mid Bank
1,049,100
14.66
751,249
715,476
> 10.00%
Tier 1 capital (to risk-weighted assets)
996,467
13.87
610,550
> 8.50%
971,672
13.58
608,154
572,380
> 8.00%
Common equity tier 1 capital (to risk-weighted assets)
962,390
13.40
502,806
> 7.00%
500,833
465,059
> 6.50%
Tier 1 capital (to average assets)
10.92
365,096
> 4.00%
10.70
363,244
454,055
> 5.00%
989,634
15.67
663,053
>10.50%
910,047
14.47
660,282
628,840
855,405
13.55
536,757
835,826
13.29
534,514
503,072
830,951
13.16
442,035
440,188
408,746
11.07
308,994
10.88
307,361
384,201
The Company's risk-weighted assets, capital, and capital ratios for June 30, 2026 were computed in accordance with Basel III capital rules. As of June 30, 2026, 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 12 -- 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 their customers. These financial instruments include lines of credit, letters of credit and other commitments to extend credit. Each of these instruments involves, to varying degrees, elements of credit, interest rate, and liquidity risk in excess of the amounts recognized in the consolidated balance sheets. The Company uses the same credit policies and requires similar collateral in approving lines of credit and commitments and issuing letters of credit as it does in making loans. The exposure to credit losses on financial instruments is represented by the contractual amount of these instruments. However, the Company does not anticipate any material losses from these instruments and has adequately reserved for these instruments.
The off-balance sheet financial instruments whose contract amounts represent credit risk at June 30, 2026 and December 31, 2025 were as follows (in thousands):
Unused commitments and lines of credit:
333,968
214,028
Commercial operating
723,170
675,087
Home equity
132,316
119,456
386,065
371,322
1,575,519
1,379,893
Standby letters of credit
16,525
17,575
Commitments to originate credit represent approved commercial, residential real estate and home equity loans that generally are expected to be funded within ninety days. Lines of credit are agreements by which the Company agrees to provide a borrowing accommodation up to a stated amount as long as there is no violation of any condition established in the loan agreement. Both commitments to originate credit and lines of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the lines and some commitments are expected to expire without being drawn upon, the total amounts do not necessarily represent future cash requirements.
Standby letters of credit are conditional commitments issued by the Company to guarantee the financial performance of customers to third parties. Standby letters of credit are primarily issued to facilitate trade or support borrowing arrangements and generally expire in one year or less. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending credit facilities to customers. The maximum amount of credit that would be extended under letters of credit is equal to the total off-balance sheet contract amount of such instrument at June 30, 2026. The Company's deferred revenue under standby letters of credit was nominal.
The Company is also subject to claims and lawsuits that arise primarily in the ordinary course of business. It is the opinion of management that the disposition 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.
The following discussion and analysis is intended to provide a better understanding of the consolidated financial condition and results of operations of the Company and its subsidiaries for the three and six months ended June 30, 2026 and 2025. This discussion and analysis should be read in conjunction with the consolidated financial statements, related notes and selected financial data appearing elsewhere in this report.
The Company maintains a website at www.firstmid.com. All periodic and current reports of the Company and amendments to these reports filed with the Securities and Exchange Commission (“SEC”) can be accessed, free of charge, through this website and at www.sec.gov as soon as reasonably practicable after these materials are filed with the SEC.
This document may contain certain forward-looking statements about the Company, such as discussions of the Company’s pricing and fee trends, credit quality and outlook, liquidity, new business results, expansion plans, anticipated expenses and planned schedules. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Forward-looking statements, which are based on certain
assumptions and describe future plans, strategies and expectations of the Company are identified by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,” or similar expressions. Actual results could differ materially from the results indicated by these statements because the realization of those results is subject to many risks and uncertainties, including, among other things, the possibility that any of the anticipated benefits of the transactions between First Mid and Two Rivers will not be realized within the expected time period; the risk that integration of the operations of Two Rivers with First Mid will be more costly or difficult than expected; the effect of the announcement of the transactions and integration of the operations of Two Rivers on customer relationships and operating results; the possibility that the transactions may be more expensive to complete than anticipated, including as a result of unexpected factors or events; changes in interest rates; general economic conditions and those in the market areas of the Company; legislative and/or regulatory changes; monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board; the quality or composition of the Company’s loan or investment portfolios and the valuation of those investment portfolios; demand for loan products; deposit flows; competition; demand for financial services in the market areas of the Company; accounting principles, policies and guidelines; or any of the other foregoing risks. Additional information concerning the Company, including additional factors and risks that could materially affect the Company’s financial results, are included in the Company’s filings with the SEC, including its Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q. Forward-looking statements speak only as of the date they are made. Except as required under the federal securities laws or the rules and regulations of the SEC, the Company does not undertake any obligation to update or review any forward-looking information, whether as a result of new information, future events or otherwise.
In addition to information presented in accordance with generally accepted accounting principles (“GAAP”), this document contains certain non-GAAP financial measures. The Company believes that such non-GAAP financial measures provide investors with information useful in understanding the Company’s financial performance. Readers of this document, however, are urged to review these non-GAAP financial measures in conjunction with the GAAP results as reported. These non-GAAP financial measures are detailed as supplemental tables and include “Average common equity to average assets.” While the Company believes this non-GAAP financial measure provides investors with a broader understanding of the capital adequacy, funding profile and financial trends of the Company, this information should be considered as supplemental in nature and not as a substitute to the related financial information prepared in accordance with GAAP. These non-GAAP financial measures may also differ from the similar measures presented by other companies.
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 $54.1 million and $45.6 million for the six months ended June 30, 2026 and 2025, respectively, and diluted net income per common share was $2.10 and $1.90 for the six months ended June 30, 2026 and 2025, respectively.
Year-ended
Return on average assets
1.23
1.20
Return on average common equity
10.31
10.52
10.24
Average common equity to average assets (non-GAAP)
11.96
11.44
11.68
Total assets were $9.2 billion at June 30, 2026, compared to $8.0 billion as of December 31, 2025. Net loan balances were $6.8 billion at June 30, 2026 compared to $5.9 billion at December 31, 2025.
Total deposit balances increased to $7.6 billion at June 30, 2026 from $6.4 billion at December 31, 2025. The increase was primarily due to the acquisition of Two Rivers Bank.
Net interest margin (tax equivalent), defined as net interest income divided by average interest-earning assets, was 3.79% for the six months ended June 30, 2026, up from 3.66% for the same period in 2025. This increase was primarily due to an increase in earning asset yields and decreased funding costs.
Net interest income before the provision for credit losses was $150.4 million compared to net interest income of $123.3 million for the same period in 2025. The increase in net interest income was primarily due to the addition of the Two Rivers Bank loan portfolio, as well as the increased net interest margin as mentioned above.
41
Total non-interest income of $55.3 million increased $6.8 million or 14.1% from $48.5 million for the same period last year. The increase in non-interest income resulted primarily from the addition of Two Rivers Bank, an increase in insurance commissions, and an increase in wealth management revenues.
Total non-interest expense of $131.4 million increased $22.1 million or 20.2% from $109.2 million for the same period last year. The increase was primarily due to increases in salaries, employee benefits, net occupancy, equipment expenses, and integration expenses due to the acquisition of Two Rivers in the first quarter of 2026.
Following is a summary of the factors that contributed to the changes in net income (in thousands):
Change inNet Income
2026 versus 2025
15,796
27,172
1,022
Other income, including securities transactions
5,240
6,817
Other expenses
(15,865
(22,118
(1,842
(3,440
Increase in net income
4,351
8,507
Credit quality is an area of importance to the Company. Total nonperforming loans were $41.3 million at June 30, 2026, compared to $21.9 million at June 30, 2025 and $31.9 million at December 31, 2025. See the discussion under the heading “Loan Quality and Allowance for Credit Losses” for a detailed explanation of these balances. Repossessed asset balances totaled $5.8 million at June 30, 2026 compared to $1.7 million at June 30, 2025 and $2.9 million at December 31, 2025.
The Company’s provision for credit losses for the six months ended June 30, 2026 and 2025 was $4.1 million and $4.2 million, respectively. The decrease in provision expense was a result of a decrease in net charge-offs partially offset by an increase in gross loan balances.
The Company’s capital position remains strong, and the Company has consistently maintained regulatory capital ratios above the “well-capitalized” standards. The Company’s Tier 1 capital to risk weighted assets ratio at June 30, 2026 and 2025 and December 31, 2025 was 13.87%, 13.31% and 13.55%, respectively. The Company’s total capital to risk weighted assets ratio at June 30, 2026 and 2025, and December 31, 2025 was 15.41%, 15.76% and 15.67%, respectively.
The Company’s liquidity position remains sufficient to fund operations and meet the requirements of borrowers, depositors, and creditors. The Company maintains various sources of liquidity to fund its cash needs. See “Liquidity” herein for a full listing of its sources and anticipated significant contractual obligations.
The Company 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 June 30, 2026 and 2025, were $1.6 billion and $1.4 billion, respectively. See Note 12 - “Commitments and Contingent Liabilities” herein for further information.
The Company has established various accounting policies that govern the application of U.S. generally accepted accounting principles in the preparation of the Company’s consolidated financial statements. The significant accounting policies and use of significant estimates of the Company are described in the footnotes to the consolidated financial statements included in the Company’s 2025 Annual Report on Form 10-K.
The largest source of operating revenue for the Company is net interest income. Net interest income represents the difference between total interest income earned on earning assets and total interest expense paid on interest-bearing liabilities. The amount of interest income is dependent upon many factors, including the volume and mix of earning assets, the general level of interest rates and the
42
dynamics of changes in interest rates. The cost of funds necessary to support earning assets varies with the volume and mix of interest-bearing liabilities and the rates paid to attract and retain such funds.
For analytical purposes, net interest income is presented on a full tax equivalent (TE) basis in the table that follows. The federal statutory rate in effect of 21% for 2026 and 2025 was used. The TE analysis portrays the income tax benefits associated with the tax-exempt assets. The year-to-date net yield on interest-earning assets excluding the TE adjustments of $1.6 million and $1.5 million for 2026 and 2025, respectively, were 3.75% and 3.62% at June 30, 2026 and 2025, respectively.
The Company’s average balances, fully tax equivalent interest income and interest expense, and rates earned or paid for major balance sheet categories are set forth for the three and six months ended June 30, 2026 and 2025 in the following table (dollars in thousands):
Average
Balance
Interest-bearing deposits
328,363
3.42
146,907
4.63
793
3.03
3,350
4.07
2,515
4.47
Investment securities (1)
1,247,888
9,868
3.16
1,082,974
7,381
2.73
Loans (TE)(1)(2)(3)
6,940,165
102,976
5.95
5,743,312
85,070
5.94
Total earning assets
8,520,559
115,685
5.45
6,975,783
94,173
5.41
Other nonearning assets
793,920
767,422
(87,449
(70,671
9,227,030
7,672,534
Liabilities and stockholders' equity
Demand deposits, interest-bearing
3,855,881
17,237
1.79
3,119,484
15,594
2.01
Savings deposits
757,972
0.25
638,174
158
0.10
Time deposits
1,543,651
12,628
3.28
1,078,174
9,213
3.43
Total interest-bearing deposits
6,157,504
30,329
1.98
4,835,832
24,965
2.07
200,906
2.06
199,345
2.45
FHLB advances
242,163
3.50
218,846
3.74
Federal funds purchased
36,897
7.72
79,554
4.28
34,045
6.81
24,360
7.64
Other debt
37,149
5.01
Total borrowings
551,161
4,897
3.56
522,105
4,574
3.51
Total interest-bearing liabilities
6,708,665
35,226
5,357,937
29,539
2.21
Non-interest-bearing demand deposits
1,365,854
1.75
1,402,374
62,134
35,264
Stockholders' equity
1,090,377
876,959
Total liabilities and stockholders' equity
80,459
64,634
Net interest spread
3.34
3.20
TE net yield on interest-earning assets
3.79
3.72
(1) Tax-exempt income is shown on a fully tax equivalent basis.
(2) Nonaccrual loans have been included in the average balances. Balances are net of unaccreted discounts related to loans acquired.
(3) Includes loans held for sale.
279,085
3.27
109,015
4.66
511
3.33
3.83
2,621
4.22
2,837
4.58
1,199,129
18,251
3.04
1,086,517
14,635
2.69
6,614,666
194,260
5.92
5,674,946
165,264
5.87
8,096,012
217,101
6,873,390
182,485
5.35
765,689
772,272
(83,359
(70,646
8,778,342
7,575,016
3,650,093
32,107
1.77
3,079,773
30,494
2.00
719,331
862
0.24
639,424
322
1,386,938
22,134
3.22
1,050,342
17,871
5,756,362
55,103
1.93
4,769,539
48,687
202,530
2.05
200,505
2.41
256,909
4,450
3.49
206,653
3,850
3.76
48,400
7.83
81,073
30,863
6.83
24,333
21,992
527
4.83
729
6.64
560,711
9,958
3.58
513,293
9,002
6,317,073
65,061
2.08
5,282,832
57,689
2.20
Demand deposits
1,358,129
1.71
1,386,330
1.74
53,654
39,120
1,049,486
866,734
152,040
124,796
3.15
3.66
Changes in net interest income may also be analyzed by segregating the volume and rate components of interest income and interest expense. The following table summarizes the approximate relative contribution of changes in average volume and interest rates to changes in net interest income for the three and six months ended June 30, 2026 and 2025, compared to the same period in 2025 (in thousands):
Three months ended June 30, 2026Compared to 2025 Increase (Decrease)
Six months ended June 30, 2026Compared to 2025 Increase (Decrease)
Change
Volume (1)
Rate (1)
Earning assets:
1,107
3,848
(2,741
2,006
4,228
(2,222
(14
(9
(5
2,487
1,152
1,335
1,552
2,064
Loans (2)
17,906
17,763
143
28,996
27,578
1,418
21,512
22,783
(1,271
34,616
33,360
1,256
Interest-bearing liabilities:
1,643
10,500
(8,857
9,734
(8,121
272
540
496
3,415
6,038
(2,623
4,263
7,283
(3,020
5,364
16,572
(11,208
6,416
17,061
(10,645
(188
(252
(343
70
(413
72
700
(628
(725
(139
(2,246
2,107
82
(1,872
1,954
407
(293
(269
232
323
(843
1,166
956
526
5,687
15,729
(10,042
7,372
17,491
(10,119
15,825
7,054
8,771
27,244
15,869
11,375
(1) 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.
Net interest income on a tax equivalent basis increased $27.2 million, or 21.83%, to $152.0 million for the six months ended June 30, 2026, from $124.8 million for the same period in 2025. Net interest income on a tax equivalent basis and tax equivalent net interest margin increased primarily due to an increase in earning asset yields and a decrease in the cost of funding.
For the six months ended June 30, 2026, average earning assets increased $1.2 billion, or 17.79%, and average interest-bearing liabilities increased $1.0 billion or 19.58% compared with average balances for the same period in 2025.
The provision for credit losses for the six months ended June 30, 2026 and 2025 was $4.1 million and $4.2 million, respectively. Nonperforming loans were $41.3 million and $21.9 million as of June 30, 2026 and 2025, respectively. Net charge offs were $2.9 million for the six months ended June 30, 2026, compared to net charge offs of $3.2 million for June 30, 2025. For information on credit loss experience and nonperforming loans, see “Nonperforming Loans and Nonperforming Other Assets” and “Loan Quality and Allowance for Credit Losses” herein.
An important source of the Company’s revenue is derived from other income. The following table sets forth the major components of other income for the three and six months ended June 30, 2026 and 2025 (in thousands):
Three months ended June 30,
$ Change
% Change
52.1
3,376
30.1
13.1
1,912
10.8
15.5
643
10.9
264
(145.9
%)
Mortgage banking, net
(256
(23.9
(246
(13.8
3.5
652
7.9
338
28.0
(0.3
626
138.5
27.6
22.2
14.1
The primary reasons for the more significant changes in other income components for the three and six months ended June 30, 2026 compared to the same period in 2025 are as follows:
The major categories of other expense include salaries and employee benefits, occupancy and equipment expenses and other operating expenses associated with day-to-day operations. The following table sets forth the major components of other expense for the three and six months ended June 30, 2026 and 2025 (dollars in thousands):
4,837
14.4
8,105
12.4
3,023
38.4
4,370
26.7
190.7
144.3
21.8
281
16.3
Amortization of other intangible assets
757
24.3
827
13.0
(56
(15.3
(185
(23.2
0.1
(373
(6.4
5.3
0.8
1,074
93.9
1,050
35.3
5,853
140.8
7,776
96.8
15,865
29.0
22,118
20.2
The primary reasons for the more significant changes in other expense components for the three and six months ended June 30, 2026 compared to the same period in 2025 are as follows:
Total income tax expense amounted to $16.1 million for the six months ended June 30, 2026, compared to $12.7 million for the same period in 2025. Effective tax rates were 22.9% for the six months ended June 30, 2026, compared to 21.7% for the same period in 2025. The Company files U.S. federal and state of Florida, Illinois, Indiana, Iowa, Missouri, Texas, and Wisconsin income tax returns.
The Company’s overall investment objectives are to insulate the investment portfolio from undue credit risk, maintain adequate liquidity, insulate capital against changes in market value and control excessive changes in earnings while optimizing investment performance. The types and maturities of securities purchased are primarily based on the Company’s current and projected liquidity and interest rate sensitivity positions.
The following table sets forth the amortized cost of the available-for-sale and held-to-maturity securities as of June 30, 2026 and December 31, 2025 (dollars in thousands):
WeightedAverage Yield
1.22
1.24
2.36
2.32
2.35
30,818
4.87
30,564
Total securities
1,426,234
2.72
1,218,101
2.25
At June 30, 2026, the amortized cost of the Company’s investment portfolio increased by $208.2 million from December 31, 2025 primarily due to the acquisition of Two Rivers Bank, subsequent sale of their entire portfolio, reinvestment of a portion of the proceeds, and the redeployment of some of the proceeds to other areas of the balance sheet. When purchasing investment securities, the Company considers its overall liquidity and interest rate risk profile, as well as the adequacy of expected returns relative to the risks assumed.
The table below presents the credit ratings as of June 30, 2026 for investment securities (in thousands):
Average Credit Rating of Fair Value at June 30, 2026 (1)
EstimatedFair Value
AAA
AA +/-
A +/-
BBB +/-
< BBB -
Not rated
Obligations of state and political subdivisions
51,416
194,719
38,342
2,535
Mortgage-backed securities (2)
2,788
4,163
20,957
337,086
41,130
846,313
Equity securities:
Federal Agricultural Mtg Corp
640
Midwest Independent BankersBank
175
260
Equalize Community Development Fund
2,720
Total equity securities
3,047
(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 June 30, 2026, and the weighted average yield for each range of maturities (dollars in thousands):
One yearor less
After 1through5 years
After 5through10 years
Afterten years
132,533
9,834
64,711
210,533
7,356
4,412
662
21,538
38,277
762,344
13,747
14,161
211,653
256,066
45,633
766,756
Weighted average yield
2.30
2.75
3.08
Full tax equivalent yield
2.16
2.77
2.92
2.86
Held to maturity:
Total held-to-maturity
The weighted average yields are calculated on the basis of the amortized cost and effective yields weighted for the scheduled maturity of each security. Tax equivalent yields have been calculated using a 21% tax rate. With the exception of obligations of the U.S. Treasury and other U.S. government agencies and corporations, there were no investment securities of any single issuer, which the book value exceeded 10% of stockholders' equity at June 30, 2026.
48
The loan portfolio (net of unearned interest) is the largest category of the Company’s earning assets. The following table summarizes the composition of the loan portfolio, including loans held for sale, as of June 30, 2026, and December 31, 2025 (dollars in thousands):
OutstandingLoans %
5.2
6.0
6.1
6.2
10.6
8.1
5.6
42.2
42.7
69.7
68.6
5.1
21.7
23.0
0.5
100.0
Loan balances increased $923.0 million, or 15.4%. The increase was primarily due to the acquisition of Two Rivers. The balance of real estate loans held for sale, included in the balances shown above, amounted to $6.7 million and $5.2 million as of June 30, 2026 and December 31, 2025, respectively.
Commercial and commercial real estate loans generally involve higher credit risks than residential real estate and consumer loans. Because payments on loans secured by commercial real estate or equipment are often dependent upon the successful operation and management of the underlying assets, repayment of such loans may be influenced to a great extent by conditions in the market or the economy. The Company does not have any sub-prime mortgages or credit card loans outstanding which are also generally considered to be higher credit risk.
First Mid Bank does not have a concentration, as defined by the regulatory agencies and land development loans or commercial real estate loans as a percentage of the total amount of the Company's total capital for the periods shown above. At June 30, 2026 and December 31, 2025, First Mid Bank did have industry loan concentrations in excess of 25% of the sum of Tier 1 Capital and allowance for loan loss in the following industries (dollars in thousands):
PrincipalBalance
Outstanding Loans %
Other grain farming
656,548
9.47
577,903
9.61
Lessors of non-residential buildings
1,272,756
18.35
1,109,224
18.45
Lessors of residential buildings and dwellings
717,373
10.35
641,822
10.68
225,569
3.75
First Mid Bank had no further industry loan concentrations in excess of 25% of the sum of Tier 1 Capital and allowance for loan loss.
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The following table presents the balance of loans outstanding as of June 30, 2026, by contractual maturities (in thousands):
Maturity (1)
One Yearor Less (2)
Over 1 Through5 Years
Over 5 Years
74,313
247,181
40,254
65,452
143,609
213,476
38,266
145,862
549,741
113,789
154,499
122,559
546,596
1,756,836
619,744
838,416
2,447,987
1,545,774
220,805
133,800
2,209
512,688
560,258
430,005
3,918
29,871
1,689
53,637
38,864
114,421
1,629,464
3,210,780
2,094,098
(1) Based upon remaining contractual maturity.
(2) Includes demand loans, past due loans, and overdrafts.
As of June 30, 2026, loans with maturities over one year consisted of approximately $3.0 billion in fixed rate loans and approximately $2.3 billion in variable rate loans. The loan maturities noted above are based on the contractual provisions of the individual loans. The Company has no general policy regarding renewals and borrower requests, which are handled on a case-by-case basis.
Nonperforming loans include: (a) loans accounted for on a nonaccrual basis; (b) accruing loans contractually past due ninety days or more as to interest or principal payments; and (c) loans not included in (a) and (b) above which are defined as “modified.” Repossessed assets include primarily repossessed real estate and automobiles.
The Company’s policy is to discontinue the accrual of interest income on any loan for which principal or interest is 90 days past due. The accrual of interest is discontinued earlier when, in the opinion of management, there is reasonable doubt as to the timely collection of interest or principal. Once interest accruals are discontinued, accrued but uncollected interest is charged against current year income. Subsequent receipts on nonaccrual loans are recorded as a reduction of principal, and interest income is recorded only after principal recovery is reasonably assured. Nonaccrual loans are returned to accrual status when, in the opinion of management, the financial position of the borrower indicates there is no longer any reasonable doubt as to the timely collection of interest or principal.
Restructured loans are loans on which, due to deterioration in the borrower’s financial condition, the original terms have been modified in favor of the borrower or either principal or interest has been forgiven. Repossessed assets represent property acquired as the result of borrower defaults on loans. These assets are recorded at estimated fair value, less estimated selling costs, at the time of foreclosure or repossession. Write-downs occurring at foreclosure are charged against the allowance for credit losses. On an ongoing basis, properties are appraised as required by market indications and applicable regulations. Write-downs for subsequent declines in value are recorded in non-interest expense in other real estate owned along with other expenses related to maintaining the properties.
The following table presents information concerning the aggregate amount of nonperforming loans and repossessed assets at June 30, 2026 and December 31, 2025 (dollars in thousands):
Nonaccrual loans
Modified loans which are performing in accordance with revised terms
864
895
Total nonperforming loans
41,293
31,948
Repossessed assets
5,805
2,859
Total nonperforming loans and repossessed assets
47,098
34,807
Nonperforming loans to loans, before allowance for credit losses
0.60
0.53
Nonperforming loans and repossessed assets to loans, before allowance for credit losses
0.68
0.58
The $9.4 million increase in nonaccrual loans during 2026 resulted from the net of $10.9 million of loans acquired from Two Rivers Bank, $4.8 million of loans put on nonaccrual status, offset by $2.4 million of loans becoming current or paid-off, $2.4 million of loans transferred to other real estate owned, and $1.5 million of loans charged off.
The following table summarizes the composition of nonaccrual loans (dollars in thousands):
% of Total
10.7
3.8
23.3
18.6
0.3
1.2
33.4
65.7
57.0
8.0
6.3
0.6
25.8
36.0
Interest income that would have been reported if nonaccrual and restructured loans had been performing totaled $1.8 million and $662,000 for the six months ended June 30, 2026 and 2025, respectively.
The $2.9 million increase in repossessed assets during 2026 resulted from $3.4 million of additional assets repossessed and $354,000 of repossessed assets sold, $100,000 of write-downs on existing assets, and $0 deferred fair value marks were recognized. The following table summarizes the composition of repossessed assets (dollars in thousands):
648
11.2
772
27.0
2.0
4,852
83.6
2,029
71.0
Total real estate
99.9
Total repossessed collateral
Repossessed assets sold during the first six months of 2026 resulted in net gains of $1,000 related to real estate asset sales and no net losses related to other assets sales.
The allowance for credit losses represents management’s estimate of the reserve necessary to adequately account for probable losses existing in the current portfolio. The provision for credit losses is the charge against current earnings that is determined by management as the amount needed to maintain an adequate allowance for credit losses. In determining the adequacy of the allowance for credit losses, and therefore the provision to be charged to current earnings, management relies predominantly on a disciplined credit review and approval process that extends to the full range of the Company’s credit exposure. The review process is directed by overall lending policy and is intended to identify, at the earliest possible stage, borrowers who might be facing financial difficulty. Once identified, the magnitude of exposure to individual borrowers is quantified in the form of specific allocations of the allowance for credit losses. Management considers collateral values and guarantees in the determination of such specific allocations. Additional factors considered by management in evaluating the overall adequacy of the allowance include historical net credit losses, the level and composition of nonaccrual, past due and renegotiated loans, trends in volumes and terms of loans, effects of changes in risk selection and underwriting standards or lending practices, lending staff changes, concentrations of credit, industry conditions and the current economic conditions in the region where the Company operates.
Management reviews economic factors including the potential for reduced cash flow for commercial operating loans from reduction in sales or increased operating costs, decreased occupancy rates for commercial buildings, the uncertainty regarding grain prices, increased operating costs for farmers, and increased levels of unemployment impacting consumers’ ability to pay. Each of these
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economic uncertainties was taken into consideration in developing the level of the reserve. Management considers the allowance for credit losses a critical accounting policy.
Management recognizes there are risk factors that are inherent in the Company’s loan portfolio. All financial institutions face risk factors in their loan portfolios because risk exposure is a function of the business. A portion of the Company’s operations (and therefore its loans) are concentrated in Illinois, where agriculture is the dominant industry. Accordingly, lending and other business relationships with agriculture-based businesses are critical to the Company’s success. At June 30, 2026, the Company’s loan portfolio included $783.0 million of loans to borrowers whose businesses are directly related to agriculture. Of this amount, $656.5 million was concentrated in other grain farming. Total loans to borrowers whose businesses are directly related to agriculture increased $101.6 million from $681.4 million at December 31, 2025 while loans concentrated in other grain farming increased $78.6 million from $577.9 million at December 31, 2025. While the Company adheres to sound underwriting practices, including collateralization of loans, any extended period of low commodity prices, drought conditions, significantly reduced yields on crops and/or reduced levels of government assistance to the agricultural industry could result in an increase in the level of problem agriculture loans and potentially result in credit losses within the agricultural portfolio. The Company also has $1.3 billion loans to lessors of non-residential buildings and $717.4 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 the best estimate of the allowance. In addition to internal policies and controls, regulatory authorities periodically review asset quality and the overall adequacy of the allowance for credit losses.
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Analysis of the allowance for credit losses as of June 30, 2026 and 2025, and of changes in the allowance for the three and six months ended June 30, 2026 and 2025, is summarized as follows (dollars in thousands):
Average loans outstanding, net of unearned income
Allowance-beginning of period
Charge-offs:
408
1,386
261
627
Total charge-offs
2,517
2,261
4,344
Recoveries:
Total recoveries
Net charge-offs
1,370
1,458
2,870
3,241
Allowance-end of period
Ratio of annualized net charge-offs to average loans
0.08
0.09
0.11
Ratio of allowance for credit losses to loans outstanding (less unearned interest at end of period)
1.25
Ratio of allowance for credit losses to nonperforming loans
211
325
The allowance for credit losses to nonperforming loans ratio has decreased due to the acquired nonperforming loans from Two Rivers Bank. Management believes that the overall estimate of the allowance for credit losses appropriately accounts for probable losses attributable to current exposures.
During the first six months of 2026, the Company had net charge offs of $2.9 million compared to net charge offs of $3.2 million during the same period of 2025. During the first six months of 2026, the Company had the following significant charge offs, two commercial real estate loans to one borrower totaling $1.1 million, one commercial loan to one borrower totaling $290,000, and ten agricultural loans to nine borrowers totaling $1.8 million. During the first six months of 2025, the Company had the following significant charge offs, one commercial real estate loan to one borrower totaling $338,000, nine agricultural loans to eight borrowers totaling $1.8 million, and three commercial operating loans to three borrowers totaling $620,000.
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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 six months ended June 30, 2026 and for the year-ended December 31, 2025 (dollars in thousands):
Year-ended December 31, 2025
AverageBalance
WeightedAverageRate
Demand deposits:
1,353,150
3,132,691
1.96
Savings
633,186
0.12
1,074,940
3.37
Total average deposits
7,114,491
1.56
6,193,967
1.59
During the first six months of 2026, the average balance of deposits increased by $920.5 million from the average balance for the year-ended December 31, 2025. The increase in the first six months of 2026 was primarily due to the acquisition of Two Rivers.
Balances of time deposits of more than $250,000 include time deposits maintained for public fund entities and consumer time deposits. The following table sets forth the maturity of time deposits of more than $250,000 at June 30, 2026 and December 31, 2025 (in thousands):
Three months or less
325,648
230,788
Over three months through twelve months
202,817
129,513
Over one year through three years
45,209
57,451
Over three years
3,461
2,512
577,135
420,264
Securities sold under agreements to repurchase are short-term obligations of First Mid Bank. These obligations are collateralized with certain government securities that are direct obligations of the United States or one of its agencies. These retail repurchase agreements are a cash management service to corporate customers. Other borrowings consist of Federal Home Loan Bank (“FHLB”) advances, federal funds purchased, loans (short-term or long-term debt) that the Company has outstanding, subordinated debt and junior subordinated debentures.
Information relating to securities sold under agreements to repurchase and other borrowings as of June 30, 2026 and December 31, 2025 is presented below (dollars in thousands):
Federal Home Loan Bank advances:
FHLB-overnight
Fixed term-due in one year or less
25,000
Fixed term-due after one year
145,000
245,000
Other borrowings:
Debt due in one year or less
1,279
Debt due after one year
38,288
473,340
551,178
Average interest rate at end of period
3.97
Maximum outstanding at any month-end:
214,360
219,772
52,811
50,000
247,369
38,607
60,072
87,505
Averages for the period (YTD):
199,430
6,142
31,615
16,616
225,294
203,363
724
361
21,268
76,140
24,376
526,467
Average interest rate during the period
Securities sold under agreement to repurchase increased $275,000 during the six months ended June 30, 2026 primarily due to the seasonal demands in balances and changes in cash flow needs of various customers. FHLB advances represent borrowings by First Mid Bank to economically fund loan demand. At June 30, 2026, the advances consisted of $170.0 million with a weighted-average interest rate of 3.35% and maturities from May 2027 to May 2036.
The Company is party to a revolving credit agreement in the amount of $15.0 million with Bankers' Bank with an outstanding balance of $0 as of June 30, 2026 and $15.0 million in available funds. This loan was entered into on April 10, 2026 for one year as a revolving credit agreement. The interest rate is floating at 0.75% under the Wall Street Journal Prime Rate as published in the Midwest edition. The Company and First Mid Bank were in compliance with the existing covenants at June 30, 2026 and 2025, and December 31, 2025.
On October 6, 2020, the Company issued and sold $96.0 million in aggregate principal amount of its 3.95% Fixed-to-Floating Rate Subordinated Notes due 2030 (the “Notes”). The Notes were issued pursuant to the Indenture, dated as of October 6, 2020 (the “Base Indenture”), between the Company and U.S. Bank National Association, as trustee (the “Trustee”), as supplemented by the First Supplemental Indenture, dated as of October 6, 2020 (the “Supplemental Indenture”), between the Company and the Trustee. The Base Indenture, as amended and supplemented by the Supplemental Indenture, governs the terms of the Notes and provides that the Notes are unsecured, subordinated debt obligations of the Company and will mature on October 15, 2030. From and including the date of issuance to, but excluding October 15, 2025, the Notes bore interest at an initial rate of 3.95% per annum. From and including October 15, 2025 to, but excluding the maturity date or earlier redemption, the Notes will bear interest at a floating rate equal to three-month Term SOFR plus a spread of 383 basis points, or such other rate as determined pursuant to the Supplemental Indenture, provided that in no event shall the applicable floating interest rate be less than zero per annum (7.51% and 3.95% at June 30, 2026 and 2025, respectively). On June 7, 2024, August 27, 2024, and September 6, 2024, the Company repurchased in open market transactions and subsequently cancelled $4.0 million, $15.0 million, and $1.0 million respectively, of the outstanding Notes. On October 15, 2025 and April 15, 2026, the Company paid down $20 million and $27.5 million respectively, of the outstanding Notes. As a result, as of June 30, 2026, $28.5 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 an 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 bore 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 (6.50% and 3.50% at June 30, 2026 and 2025, respectively). 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 June 30, 2026, $4.5 million in aggregate principal amount of Blackhawk Subordinated Debt I Notes remain issued and outstanding.
On August 15, 2023, the Company assumed, as part of the Blackhawk Bancorp, Inc. acquisition, $7.5 million principal amount of 3.875% Fixed-to-Floating Rate Subordinated Notes due 2036 (“Blackhawk Subordinated Debt II”). Blackhawk Subordinated Debt II was issued pursuant to an 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 bore 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 June 30, 2026, $500,000 in aggregate principal amount of Blackhawk Subordinated Debt II Notes remain issued and outstanding.
On February 28, 2026, the Company assumed, as part of the Two Rivers acquisition, $20.0 million principal amount of 3.75% Fixed-to-Floating Rate Note Payable due 2029 (“Two Rivers Note Payable”). The Two Rivers Note Payable was issued pursuant to an Indenture between the Company and Bankers Bank, as trustee. This Indenture governs the terms of the Two Rivers Note Payable and provides that such note will mature on September 30, 2029. From and including the date of issuance to, but excluding the date of July 1, 2026, the notes will bear interest at an initial rate of 3.75% per annum. From and including July 1, 2026 to, but excluding the maturity date, the notes will bear interest at a fixed rate of 6.125% per annum. As of June 30, 2026, $19.7 million in aggregate principal amount of the Two Rivers Note Payable remains issued and outstanding.
On April 10, 2026, the Company issued $20.0 million principal amount of a Floating Rate Note Payable due 2029 (“First Mid Note Payable”). The First Mid Note Payable was issued pursuant to an Indenture between the Company and Bankers Bank, as trustee. This Indenture governs the terms of the First Mid Note Payable and provides that such note will mature on April 10, 2029. The notes will bear interest at a floating rate equal to thirty-day Term SOFR plus a spread of 275 basis points (6.34% at June 30, 2026). As of June 30, 2026, $19.9 million in aggregate principal amount of the First Mid Note Payable remains issued and outstanding.
On April 26, 2006, the Company completed the issuance and sale of $10 million of fixed/floating rate trust preferred securities through First Mid-Illinois Statutory Trust II (“Trust II”), a statutory business trust and wholly owned unconsolidated subsidiary of the Company, as part of a pooled offering. The Company established Trust II for the purpose of issuing the trust preferred securities. The $10.0 million in proceeds from the trust preferred issuance and an additional $310,000 for the Company’s investment in common equity of Trust II, a total of $10.3 million, was invested in junior subordinated debentures of the Company. The underlying junior subordinated debentures issued by the Company to Trust II mature in 2036, bore interest at a fixed rate of 6.98% paid quarterly until June 15, 2011 and then converted to floating rate (SOFR plus 160 basis points) after June 15, 2011 (5.53% and 5.59% at June 30, 2026 and December 31, 2025, respectively). The net proceeds to the Company were used for general corporate purposes, including the Company’s acquisition of Mansfield Bancorp, Inc. in 2006.
On September 8, 2016, the Company assumed the trust preferred securities of Clover Leaf Statutory Trust I (“CLST I”), a statutory business trust that was a wholly owned unconsolidated subsidiary of First Clover Financial. The $4.0 million of trust preferred securities and an additional $124,000 additional investment in common equity of CLST I, is invested in junior subordinated debentures issued to CLST I. The subordinated debentures mature in 2035, bear interest at three-month SOFR plus 185 basis points (5.78% and 5.84% at June 30, 2026 and December 31, 2025, respectively) and reset quarterly.
On May 1, 2018, the Company assumed the trust preferred securities of FBTC Statutory Trust I (“FBTCST I”), a statutory business trust that was a wholly owned unconsolidated subsidiary of First BancTrust Corporation. The $6.0 million of trust preferred securities and an additional $186,000 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 (5.63% and 5.69% at June 30, 2026 and December 31, 2025, respectively) and reset quarterly.
On August 15, 2023, the Company assumed the trust preferred securities of Blackhawk Statutory Trust I (“BHST I”), a statutory business trust that was a wholly owned unconsolidated subsidiary of Blackhawk Bancorp, Inc. The $1.0 million trust preferred securities and an additional $31,000 investment in common equity of BHST I is invested in junior subordinated debentures issued to BHST I. The subordinated debentures mature in 2032, bear interest at three-month SOFR plus 325 basis points (7.26% and 7.20% at June 30, 2026 and December 31, 2025, respectively) and reset quarterly.
On August 15, 2023, the Company assumed the trust preferred securities of Blackhawk Statutory Trust II (“BHST II”), a statutory business trust that was a wholly owned unconsolidated subsidiary of Blackhawk Bancorp, Inc. The $4.0 million of trust preferred securities and an additional $124,000 investment in common equity of BHST II is invested in junior subordinated debentures issued to BHST II. The subordinated debentures mature in 2035, bear interest at three-month SOFR plus 205 basis points (5.98% and 6.02% at June 30, 2026 and December 31, 2025, respectively) and reset quarterly.
On February 28, 2026, the Company assumed the trust preferred securities of Great River Capital Trust I (“GRCT I”), a statutory business trust that was a wholly owned unconsolidated subsidiary of Two Rivers. The $10.0 million of trust preferred securities and an additional $310,000 investment in common equity of GRCT I is invested in junior subordinated debentures issued to GRCT I. The subordinated debentures mature in 2035, bear interest at three-month SOFR plus 175 basis points (5.68% at June 30, 2026) and reset quarterly.
The trust preferred securities issued by Trust II, CLST I, FBTCST I, BHST I, BHST II, and GRCT I are included as Tier 1 capital of the Company for regulatory capital purposes. On March 1, 2005, the Federal Reserve Board adopted a final rule that allows the continued limited inclusion of trust preferred securities in the calculation of Tier 1 capital for regulatory purposes. The final rule provided a five-year transition period, ending September 30, 2010, for application of the revised quantitative limits. On March 17, 2009, the Federal Reserve Board adopted an additional final rule that delayed the effective date of the new limits on inclusion of trust preferred securities in the calculation of Tier 1 capital until March 31, 2012. The application of the revised quantitative limits did not and is not expected to have a significant impact on its calculation of Tier 1 capital for regulatory purposes or its classification as well-capitalized. The Dodd-Frank Act, signed into law July 21, 2010, removes trust preferred securities as a permitted component of a holding company’s Tier 1 capital after a three-year phase-in period beginning January 1, 2013, for larger holding companies. For holding companies with less than $15 billion in consolidated assets, existing issues of trust preferred securities are grandfathered and not subject to this new restriction. New issuances of trust preferred securities, however, would not count as Tier 1 regulatory capital.
In addition to requirements of the Dodd-Frank Act discussed above, the act also required the federal banking agencies to adopt rules that prohibit banks and their affiliates from engaging in proprietary trading and investing in and sponsoring certain unregistered investment companies (defined as hedge funds and private equity funds). This rule is generally referred to as the “Volcker Rule.” On December 10, 2013, the federal banking agencies issued final rules to implement the prohibitions required by the Volcker Rule. Following the publication of the final rule, and in reaction to concerns in the banking industry regarding the adverse impact the final rule’s treatment of certain collateralized debt instruments has on community banks, the federal banking agencies approved a final rule to permit banking entities to retain interests in certain collateralized debt obligations backed primarily by trust preferred securities. Under the final rule, the agencies permit the retention of an interest in or sponsorship of covered funds by banking entities under $15 billion in assets if (1) the collateralized debt obligation was established and issued prior to May 19, 2010, (2) the banking entity
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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.
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 June 30, 2026 (dollars in thousands):
Rate Sensitive Within
1 Year
1-3 Years
3-5 Years
Interest-earning assets:
Federal funds sold and other interest-bearing deposits
238,387
Taxable investment securities
75,337
292,970
43,353
598,517
1,010,177
Nontaxable investment securities
62,323
57,397
150,457
5,639
275,816
4,120,712
1,673,519
851,424
288,687
6,842,459
4,501,329
2,023,886
1,045,234
892,843
8,463,292
8,371,409
Demand deposits and savings accounts
1,489,496
1,658,001
3,147,497
Money market accounts
1,373,685
Other time deposits
1,446,734
102,701
12,986
1,349
1,563,770
Short-term borrowings/debt
198,270
Long-term borrowings/debt
204,673
20,397
275,070
272,656
4,712,858
152,701
33,383
1,659,350
6,558,292
6,485,271
Rate sensitive assets-rate sensitive liabilities
(211,529
1,871,185
1,011,851
(766,507
1,905,000
Cumulative GAP
1,659,656
2,671,507
Cumulative amounts as % of total rate sensitive assets
(2.5
22.1
12.0
(9.1
Cumulative Ratio
19.6
31.6
22.5
The static GAP analysis shows that at June 30, 2026, the Company was liability sensitive, on a cumulative basis, through the twelve-month time horizon. This indicates that future increases in interest rates could have an adverse effect on net interest income. There are several ways the Company measures and manages its exposure to interest rate sensitivity, including static GAP analysis. The Company’s ALCO also uses other financial models to project interest income under various rate scenarios and prepayment/extension assumptions consistent with First Mid Bank's historical experience and with known industry trends. ALCO meets at least monthly to review the Company’s exposure to interest rate changes as indicated by the various techniques and to make necessary changes in the composition terms and/or rates of the assets and liabilities.
At June 30, 2026, the Company’s stockholders' equity had increased $143.1 million, or 14.9%, to $1.1 billion from $958.7 million as of December 31, 2025. During the six months ended June 30, 2026, net income contributed $54.1 million to equity before the payment of dividends to stockholders of $12.6 million. The change in market value of available-for-sale investment securities decreased stockholders' equity by $3.5 million, net of tax. The acquisition of Two Rivers increased equity by $104.2 million.
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 June 30, 2026, the Company classified the cost basis of its common stock issued and held in trust in connection with the DCP of approximately $7.1 million as treasury stock. The Company also classified the cost basis of its related deferred compensation obligation of approximately $7.1 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 six months ended June 30, 2026 and 2025, the Company awarded 88,925 and 79,635 shares as stock and stock unit awards, respectively.
Stock Repurchase Program. On June 24, 2025, the Board of Directors approved a repurchase program (the “2025 Repurchase Program”), which became effective on July 1, 2025. The 2025 Repurchase Program supersedes all previous repurchase plans and authorizes the Company to repurchase up to 1.2 million shares of the Company’s common stock. During the six months ended June 30, 2026, the Company repurchased 34,558 shares. As of June 30, 2026, the Company had approximately 1.2 million shares or approximately $56.0 million in remaining capacity under the 2025 Repurchase Program.
Although the Company adopted the repurchase plan, the Company may make discretionary repurchases in the open market or in privately negotiated transactions from time to time. The timing, manner, price, and amount of any such repurchases will be determined by the Company at its discretion and will depend upon a variety of factors including economic and market conditions, price, applicable legal requirements, and other factors.
Employee Stock Purchase Plan. At the Annual Meeting of Stockholders held April 25, 2018, the stockholders approved the First Mid Bancshares, Inc. Employee Stock Purchase Plan (“ESPP”). The ESPP provides eligible employees with the opportunity to purchase shares of common stock of the Company at a 15% discount through payroll deductions. The ESPP is intended to qualify as an employee stock purchase plan under Section 423 of the Internal Revenue Code. A maximum of 600,000 shares of common stock may be issued under the ESPP. During the six months ended June 30, 2026 and 2025, 13,464 shares and 13,970 shares, respectively, were issued pursuant to the ESPP. As of June 30, 2026, there were 430,559 shares unassigned but available to be issued under the ESPP.
Liquidity represents the ability of the Company and its subsidiaries to meet all present and future financial obligations arising in the daily operations of the business. Financial obligations consist of the need for funds to meet extensions of credit, deposit withdrawals, and debt servicing. The Company’s liquidity management focuses on the ability to obtain funds economically through assets that may be converted into cash at minimal costs or through other sources. The Company’s other sources of cash include overnight federal fund lines, Federal Home Loan Bank advances, the ability to borrow at the Federal Reserve Bank of Chicago and Des Moines, and the Company’s operating line of credit with Bankers' Bank. Details for these sources include:
Management continues to monitor its expected liquidity requirements carefully, focusing primarily on cash flow from:
The following table summarizes significant contractual obligations and other commitments at June 30, 2026 (in thousands):
Less than
More than
5 Years
Subordinated debt, net and junior subordinated debt, net
66,782
32,308
34,474
406,558
223,270
69,983
113,305
Operating leases
3,605
5,661
3,042
2,259
Supplemental retirement
2,007
250
400
1,307
2,053,684
1,673,659
178,595
162,041
39,389
For the six months ended June 30, 2026, net cash of $51.4 million was provided by operating activities, $11.7 million was used in investing activities, and $9.2 million was provided by financing activities. In total, cash and cash equivalents increased by $48.9 million from December 31, 2025.
There has been no material change in the market risk faced by the Company since December 31, 2025. For information regarding the Company’s market risk, refer to the Company’s Annual Report on Form 10-K for the year-ended December 31, 2025.
The Company’s management carried out an evaluation, under the supervision and with the participation of the chief executive officer and the chief financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of June 30, 2026. Based upon that evaluation, the chief executive officer along with the chief financial officer concluded that the Company’s disclosure controls and procedures as of June 30, 2026, were effective.
There were no changes in the Company’s internal control over financial reporting that occurred during the Company's last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
ITEM 1. LEGAL PROCEEDINGS
From time to time the Company and its subsidiaries may be involved in litigation that the Company believes is a type common to the Company's industry. None of any such existing claims are believed to be individually material at this time to the Company, although the outcome of any such existing claims cannot be predicted with certainty.
Various risks and uncertainties, some of which are difficult to predict and beyond the Company’s control, could negatively impact the Company. As a financial institution, the Company is exposed to credit risk, interest rate and liquidity risk, operational risk, risks from economic and market conditions, and other general business risks, among others. Adverse experience with these or other risks could have a material impact on the Company’s financial condition and results of operations, as well as the value of its common stock.
See the risk factors and “Supervision and Regulation General” described in the Company’s Annual Report on Form 10-K for the year-ended December 31, 2025. There have been no material changes to the risk factors described in the Company's Annual Report on Form 10-K for the year-ended December 31, 2025.
During the quarter ended June 30, 2026, the Company did not sell any equity securities that were not registered under the Securities Act of 1933.
The Company’s common stock is included for quotation on the NASDAQ Stock Market, LLC under the trading symbol “FMBH.”
The Company’s shareholders are entitled to receive dividends as are declared by the Board of Directors, which considered quarterly payment of dividends during 2026. The ability of the Company to pay dividends, as well as fund its operations, is dependent upon receipt of dividends from First Mid Bank. Regulatory authorities limit the amount of dividends that can be paid by First Mid Bank without prior approval from such authorities. For further discussion of the Bank’s dividend restrictions, see Item 1 – “Business” – “First Mid Bank” – “Dividends” and Note 16 – “Dividend Restrictions” described in the Company's Annual Report on Form 10-K for the year-ended December 31, 2025.
The following table summarizes share repurchase activity for the quarter ending June 30, 2026:
ISSUER PURCHASES OF EQUITY SECURITIES
Period
(a) TotalNumberof SharesPurchased
(b) AveragePrice Paidper Share
(c) TotalNumberof SharesPurchasedas Part ofPubliclyAnnouncedPlans orPrograms
(d) ApproximateDollar Valueof Sharesthat MayYet BePurchasedUnder thePlans orPrograms atEnd of Period
April 1, 2026 - April 30, 2026
49,974,046
May 1, 2026 - May 31, 2026
21,872
42.12
51,337,720
June 1, 2026 - June 30, 2026
56,046,106
On June 24, 2025, the Board of Directors approved a repurchase program (the “2025 Repurchase Program”), which became effective on July 1, 2025. The 2025 Repurchase Program supersedes all previous repurchase plans and authorizes the Company to repurchase up to 1.2 million shares of the Company's common stock. During the six months ended June 30, 2026, the Company repurchased 34,558 shares through this plan.
See heading “Stock Repurchase Program” for more information regarding stock purchases.
None.
Not applicable.
None of the Company's directors and officers adopted, modified or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the Company's fiscal quarter ended June 30, 2026 (each as defined in Item 408 of Regulation S-K under the Securities Exchange Act of 1934, as amended).
62
The exhibits required by Item 601 of Regulation S-K and filed herewith are listed in the Exhibit Index that precedes the Signature Page and the exhibits filed.
Exhibit Index to Quarterly Report on Form 10-Q Description and Filing or Incorporation Reference
10.1
Business Loan Agreement, dated April 10, 2026, by and between the Company and Bankers' Bank
Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on April 15, 2026
10.2
Promissory Note (Revolving Line of Credit), dated April 10, 2026, by and between the Company and Bankers' Bank
Incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the SEC on April 15, 2026
10.3
Promissory Note (Term Loan), dated April 10, 2026 by and between the Company and Bankers' Bank
Incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed with the SEC on April 15, 2026
10.4
Employment Agreement between the Company and Matthew K. Smith, effective July 1, 2026
Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on April 29, 2026
31.1
Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002
(Filed herewith)
31.2
32.1
Certification pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002
32.2
101.INS
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document
101.SCH
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents
104
Cover page formatted as Inline XBRL and contained in Exhibit 101
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
FIRST MID BANCSHARES, INC.
(Registrant)
Date: August 7, 2026
/s/ Matthew K. Smith
Matthew K. Smith
President and Chief Executive Officer
/s/ Jordan D. Read
Jordan D. Read
Chief Financial and Risk Officer