Net Interest Income
Net interest income for the third quarter of 2023 increased by $8.1 million, or 19.1% compared to the second quarter of 2023. Interest income and interest expense increased in the quarter by $14.3 million and $6.3 million, respectively. The increase in interest income was primarily driven by the addition of Blackhawk and the repricing of loans with higher interest rates. Accretion income for the quarter was $2.6 million, an increase compared to $0.5 million in the prior quarter. Interest expense increased primarily from the addition of Blackhawk and higher interest rates. The third quarter interest expense included $0.4 million in amortization of premiums on time deposits.

In comparison to the third quarter of 2022, net interest income increased $2.2 million, or 4.3%. The increase was primarily driven by the addition of Blackhawk. Interest income increased by $23.7 million, while interest expense increased $21.5 million.

Net Interest Margin
Net interest margin, on a tax equivalent basis (non-GAAP), was 3.06% for the third quarter of 2023, which was 22 basis points higher compared to the prior quarter. Earning asset yields increased by 46 basis points and the average cost of funds increased 24 basis points. The quarter included a net $2.2 million of purchase accounting benefit.

In comparison to the third quarter of last year, the net interest margin decreased 15 basis points, with an average earnings asset increase of 112 basis points versus the average cost of funds increase of 127 basis points.

Loan Portfolio
Total loans ended the quarter at $5.54 billion, representing an increase of $726.6 million. Excluding the Blackhawk acquired net loans in the period, loans decreased by $3.5 million compared to the prior quarter. The largest category of growth came in CRE, while C&I loans declined the most. Overall, loan demand was slower in the quarter, but new opportunities were well diversified both geographically and by sector. The weighted average yield on new loans was 8.88% in the quarter.

Asset Quality
The Company’s strong credit culture continues to be reflected in its asset quality metrics for September 30, 2023. The allowance for credit losses (“ACL”) increased by $9.6 million to $68.2 million with an ending ACL to total loans ratio of 1.23%. In addition to the ACL, an unearned discount of $54.5 remains at quarter end providing another 99 basis points of coverage. Provision expense was recorded in the amount of $5.9 million, inclusive of the Blackhawk acquisition CECL requirement. The Company had a total of $0.2 million in net charge offs in the quarter. Also, at the end of the third quarter, the ratio of non-performing loans to total loans was 0.38%, and the ACL to non-performing loans was 320.85%. The ratio of nonperforming assets to total assets was 0.30% and nonperforming loans were $21.3 million at quarter end. For the quarter, special mention loans were $73.7 million of which $24.5 million were added for Blackhawk. Substandard loans at the end of the quarter were $30.6 million of which $4.1 million were added for Blackhawk.

Deposits
Total deposits ended the quarter at $6.35 billion, which represented an increase of $1.13 billion. Excluding the net deposits acquired from Blackhawk, deposits declined by $68.2 million from the prior quarter. Most of the changes in the period were driven by seasonal real estate tax and overall customer operating needs. Although the deposit cost pressures continue, outflows directly tied to pricing trended lower in the quarter. The Company’s average rate on cost of funds increased to 1.83% compared to 1.59% in the prior quarter and 0.56% in the third quarter of 2022.

Noninterest Income
Noninterest income represented 31% of our total net revenues in the quarter and 32% year-to-date.

Noninterest income for the third quarter of 2023 was $23.1 million compared to $19.5 million in the second quarter of 2023. The increase compared to the prior quarter was primarily due to the addition of Blackhawk and a $3.4 million gain on securities sales tied to the balance sheet restructuring after closing the acquisition.

In comparison to the third quarter of 2022, noninterest income increased $6.3 million, or 37.3%, due to a combination of organic growth, the addition of Blackhawk and the securities gains.

Noninterest Expenses
Noninterest expense for the third quarter of 2023 totaled $47.1 million compared to $40.0 million in the prior quarter. The increase was primarily driven by the addition of Blackhawk and approximately $2.1 million in nonrecurring acquisition related costs.

In comparison to the third quarter of 2022, noninterest expenses increased $5.5 million, inclusive of $2.1 million in nonrecurring acquisition related costs. The increase was primarily driven by the addition of Blackhawk. Excluding Blackhawk and acquisition related costs, the primary changes were lower salaries and benefits costs tied to the cost savings initiatives at the end of the first quarter.

The Company’s efficiency ratio, as adjusted in the non-GAAP reconciliation table herein, for the third quarter 2023 was 58.6% compared to 60.4% in the prior quarter and 59.6% for the same period last year.

Capital Levels
The Company’s capital levels remained strong and above the “well capitalized” levels. During the third quarter, the closing of the Blackhawk acquisition resulted in decreases to the ratios. Capital levels ended the period as follows:

Tangible book value per share declined in the period to $19.73. The decrease was primarily the result of the acquisition of Blackhawk and an increase to the unrealized loss position in the bond portfolio impacting accumulated other comprehensive income (“AOCI”). The reduction to tangible book value per share from AOCI was $1.15.

About First Mid: First Mid Bancshares, Inc. (“First Mid”) is the parent company of First Mid Bank & Trust, N.A., Blackhawk Bank, First Mid Insurance Group, Inc., and First Mid Wealth Management Co. First Mid is a $7.9 billion community-focused organization that provides a full-suite of financial services including banking, wealth management, brokerage, Ag services, and insurance through a sizeable network of locations throughout Illinois, Missouri, Texas, and Wisconsin and a loan production office in the greater Indianapolis area. Together, our First Mid team takes great pride in providing solutions and services to the customers and communities and has done so over the last 157 years. More information about the Company is available on our website at www.firstmid.com.

Non-GAAP Measures: In addition to reports presented in accordance with generally accepted accounting principles (“GAAP”), this release 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 release, 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 “Adjusted Net Income,” “Adjusted Diluted EPS,” “Efficiency Ratio,” “Net Interest Margin, tax equivalent,” and “Tangible Book Value per Common Share”. While the Company believes these non-GAAP financial measures provide 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.

Forward Looking Statements
This document may contain certain forward-looking statements about First Mid, such as discussions of First Mid’s pricing and fee trends, credit quality and outlook, liquidity, new business results, expansion plans, anticipated expenses and planned schedules. First Mid 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 First Mid 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 integration of the operations of Blackhawk with First Mid will be materially delayed or will be more costly or difficult than expected; the inability to complete the proposed transactions due to the failure to satisfy conditions to completion of the proposed transactions, including failure to obtain the required regulatory, shareholder and other approvals; the failure of the proposed transactions to close for any other reason; the effect of the announcement of the proposed transactions on customer relationships and operating results; the possibility that the proposed transactions may be more expensive to complete than anticipated, including as a result of unexpected factors or events; changes in interest rates; general economic conditions and those in the market areas of First Mid; 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 First Mid’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 First Mid; accounting principles, policies and guidelines; and the impact of the global COVID-19 pandemic on First Mid’s businesses, the ability to complete the proposed transactions or any of the other foregoing risks. Additional information concerning First Mid, including additional factors and risks that could materially affect First Mid’s financial results, are included in First Mid’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, we do not undertake any obligation to update or review any forward-looking information, whether as a result of new information, future events or otherwise.

Investor Contact:
Aaron Holt
VP, Shareholder Relations
217-258-0463
[email protected]

Matt Smith
Chief Financial Officer
217-258-1528
[email protected]

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