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What changed in FIRST MID BANCSHARES, INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of FIRST MID BANCSHARES, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+256 added−270 removedSource: 10-K (2024-03-06) vs 10-K (2023-03-03)

Top changes in FIRST MID BANCSHARES, INC.'s 2023 10-K

256 paragraphs added · 270 removed · 227 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

64 edited+6 added−12 removed106 unchanged
Biggest changeOn September 25, 2020, the Company and Eval Sub Inc., a wholly owned subsidiary of the Company ("LINCO Merger Sub"), entered into an Agreement and Plan of Merger (the "LINCO Merger Agreement") with LINCO Bancshares, Inc., the former parent of Providence Bank ("LINCO"), and the sellers as defined therein, pursuant to which, among other things, the Company agreed to acquire 100% of the issued and outstanding shares of LINCO pursuant to a business combination whereby LINCO Merger Sub merged with and into LINCO, whereupon the separate corporate existence of LINCO Merger Sub ceased and LINCO continued as the surviving company and a wholly owned subsidiary of the Company (the "LINCO Merger").
Biggest change(“First Mid”) and Eagle Sub LLC, a newly formed Wisconsin limited liability company and wholly-owned subsidiary of First Mid (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Blackhawk Bancorp, Inc., a Wisconsin corporation (“Blackhawk”), pursuant to which, among other things, First Mid agreed to acquire 100% of the issued and outstanding shares of Blackhawk pursuant to a business combination whereby Blackhawk will merge with and into Merger Sub, whereupon the separate corporate existence of Blackhawk will cease and Merger Sub will continue as the surviving company and a wholly-owned subsidiary of First Mid (the “Blackhawk Merger”).
The ERM process was not undertaken as a result of any weaknesses or deficiencies identified during the Company’s control assessments but rather is part of the Company’s effort to continually assess and improve by taking a more holistic approach to risk management. The Company's Chief Risk Management Officer is responsible for facilitating the ERM process.
The ERM process was not undertaken as a result of any weaknesses or deficiencies identified during the Company’s control assessments but rather is part of the Company’s effort to continually assess and improve by taking a more holistic approach to risk management. The Company's Chief Risk Officer is responsible for facilitating the ERM process.
The Company utilizes a comprehensive set of operational policies and procedures that have been developed over time. These policies are continually reviewed by management, the Chief Risk Management Officer, and the Board of Directors. The Company’s internal audit function completes procedures to ensure compliance with these policies.
The Company utilizes a comprehensive set of operational policies and procedures that have been developed over time. These policies are continually reviewed by management, the Chief Risk Officer, and the Board of Directors. The Company’s internal audit function completes procedures to ensure compliance with these policies.
The Company offers a wide array of benefits for its employees including: • Medical, Dental, and Vision Insurance Plans • Flexible Spending Accounts • Health Savings Accounts with a Company Matching Contribution • Company provided Life Insurance • Company provided Long Term Disability • Company provided Premier Checking Account • 401(k) Plan including a Company Match • Profit Sharing Contribution • Employee Stock Purchase Plan with an Employee Discount • Voluntary Ancillary Insurance Plans • Paid Time Off (Vacation, Sick, Volunteer and Personal Time) • Maternity/Paternity Paid Leave • Tuition Reimbursement • Computer Purchase Program • Dress Professional Program • Service Anniversary/Retirement Recognition & Award • Chairman’s Award – Top Peer Recognition • Volunteer Time Recognition • Company Apparel – Company Pays 50% • Opportunity for Bonus and Stock awards 4 Encouraging Volunteerism The Company invests in and contributes to the growth and development of its communities.
The Company offers a wide array of benefits for its employees including: • Medical, Dental, and Vision Insurance Plans • Flexible Spending Accounts • Health Savings Accounts with a Company Matching Contribution • Company provided Life Insurance • Company provided Long Term Disability • Company provided Premier Checking Account • 401(k) Plan including a Company Match • Profit Sharing Contribution • Employee Stock Purchase Plan with an Employee Discount • Voluntary Ancillary Insurance Plans • Paid Time Off (Vacation, Sick, Volunteer and Personal Time) • Maternity/Paternity Paid Leave • Tuition Reimbursement • Computer Purchase Program • Dress Professional Program 4 • Service Anniversary/Retirement Recognition & Award • Chairman’s Award – Top Peer Recognition • Volunteer Time Recognition • Company Apparel – Company Pays 50% • Opportunity for Bonus and Stock awards • Employee Referral Program Encouraging Volunteerism The Company invests in and contributes to the growth and development of its communities.
The Act, among other things: 7 • Resulted in the Federal Reserve issuing rules limiting debit-card interchange fees. • After a three-year phase-in period which began January 1, 2013, existing trust preferred securities for holding companies with consolidated assets greater than $15 billion and all new issuances of trust preferred securities are removed as a permitted component of a holding company’s Tier 1 capital.
The Act, among other things: • Resulted in the Federal Reserve issuing rules limiting debit-card interchange fees. • After a three-year phase-in period which began January 1, 2013, existing trust preferred securities for holding companies with consolidated assets greater than $15 billion and all new issuances of trust preferred securities are removed as a permitted component of a holding company’s Tier 1 capital.
Subject to the terms and conditions of the Delta Merger Agreement, at the effective time of the Delta Merger, each share of common stock, par value $10.00 per share, of Delta issued and outstanding immediately prior to the effective time of the Delta Merger (other than shares held in treasury by Delta) converted into and became the right to receive cash and shares of common stock, par value $4.00 per share, of the Company and cash in lieu of fractional shares, less any applicable taxes required 6 to be withheld, and subject to certain potential adjustments.
Subject to the terms and conditions of the Delta Merger Agreement, at the effective time of the Delta Merger, each share of common stock, par value $10.00 per share, of Delta issued and outstanding immediately prior to the effective time of the Delta Merger (other than shares held in treasury by Delta) converted into and became the right to receive cash and shares of common stock, par value $4.00 per share, of the Company and cash in lieu of fractional shares, less any applicable taxes required to be withheld, and subject to certain potential adjustments.
Failure to comply with these laws and regulations could lead to substantial penalties, operating restrictions, and reputational damage to the financial institution. 11 Supplemental Item – Executive Officers of the Registrant The executive officers of the Company are elected annually by the Company’s Board of Directors and are identified below. Name (Age) Position With Company Joseph R.
Failure to comply with these laws and regulations could lead to substantial penalties, operating restrictions, and reputational damage to the financial institution. Supplemental Item – Executive Officers of the Registrant The executive officers of the Company are elected annually by the Company’s Board of Directors and are identified below. Name (Age) Position With Company Joseph R.
For purposes of these capital standards, Tier 1 capital consists primarily of permanent stockholders’ equity, less intangible assets (other than certain mortgage servicing rights and purchased credit card relationships), and total capital means Tier 1 capital plus certain other debt and equity instruments which do not qualify as Tier 1 capital, limited amounts of unrealized gains on equity securities and a portion of the Company’s allowance for loan and lease losses.
For purposes of these capital standards, Tier 1 capital consists primarily of permanent stockholders’ equity, less intangible assets (other than certain mortgage servicing rights and purchased credit card relationships), and total capital means Tier 1 capital plus certain other debt and equity instruments which do not qualify as Tier 1 capital, limited amounts of unrealized gains on equity securities and a portion of the Company’s allowance for credit losses.
In addition, the implementation of Leadership Development Training in 2022, provided all managers with information to enhance their skills with the hiring process, coaching, crucial conversations, and employee engagement. The Company also provides leadership training based on the book The Leadership Pipeline . This training is provided for executive, upper and mid-level management employees and is highly interactive.
In addition, the implementation of Leadership Development Training in 2023 provided all managers with information to enhance their skills with the hiring process, coaching, crucial conversations, and employee engagement. The Company also provides leadership training based on the book The Leadership Pipeline . This training is provided for executive, upper and mid-level management employees and is highly interactive.
Over 50% of the Company’s workforce contributed to its annual United Way campaign which resulted in a total contribution to the United Way of over $145,000. Business Strategies Vision Statement. The Company’s vision statement is to be a nimble, independent, community-focused financial organization committed to quality, growth and earned independence for the benefit of all stakeholders. Growth Strategy.
Over 50% of the Company’s workforce contributed to its annual United Way campaign which resulted in a total contribution to the United Way of over $133,000. Business Strategies Vision Statement. The Company’s vision statement is to be a nimble, independent, community-focused financial organization committed to quality, growth and earned independence for the benefit of all stakeholders. Growth Strategy.
The Company strives to provide a competitive dividend as well as the opportunity for stock price appreciation. Risk Management Strategy. The Company maintains a comprehensive risk management framework.
The Company strives to provide a competitive dividend as well as the opportunity for stock price appreciation. 5 Risk Management Strategy. The Company maintains a comprehensive risk management framework.
He was with Consolidated Communications Holdings, Inc. in Mattoon, Illinois from 2003 to May 2011. Michael L. Taylor, age 54, has been Senior Executive Vice President since 2014 and Chief Operating Officer since July 2017. He served as Chief Financial Officer of the Company from 2000 to 2017.
He was with Consolidated Communications Holdings, Inc. in Mattoon, Illinois from 2003 to May 2011. Michael L. Taylor, age 55, has been Senior Executive Vice President since 2014 and Chief Operating Officer since July 2017. He served as Chief Financial Officer of the Company from 2000 to 2017.
First Mid Bank's total risk-based capital ratio was 14.18%, Tier 1 risk-based ratio was 13.17%, common equity Tier 1 ratio was 13.17% and leverage ratio was 10.22%. Prompt Corrective Action. Federal law provides the federal banking regulators with broad power to take prompt corrective action to resolve the problems of undercapitalized institutions.
First Mid Bank's total risk-based capital ratio was 14.22%, Tier 1 risk-based ratio was 13.17%, common equity Tier 1 ratio was 13.17% and leverage ratio was 10.23%. Prompt Corrective Action. Federal law provides the federal banking regulators with broad power to take prompt corrective action to resolve the problems of undercapitalized institutions.
During the year ended December 31, 2022, First Mid Bank was not required to increase capital to an amount in excess of the minimum regulatory requirements, and capital ratios exceeded those required for categorization as well-capitalized under the capital adequacy guidelines established by bank regulatory agencies.
During the year ended December 31, 2023, First Mid Bank was not required to increase capital to an amount in excess of the minimum regulatory requirements, and capital ratios exceeded those required for categorization as well-capitalized under the capital adequacy guidelines established by bank regulatory agencies.
He served as Executive Vice President from 2007 to 2014 and as Vice President from 2000 to 2007. He was with AMCORE Bank in Rockford, Illinois from 1996 to 2000. Matthew K. Smith, age 48, has been Executive Vice President of the Company since November 2016 and Chief Financial Officer since July 2017.
He served as Executive Vice President from 2007 to 2014 and as Vice President from 2000 to 2007. He was with AMCORE Bank in Rockford, Illinois from 1996 to 2000. Matthew K. Smith, age 49, has been Executive Vice President of the Company since November 2016 and Chief Financial Officer since July 2017.
Dively, age 63, is the Chairman of the Board of Directors, President and Chief Executive Officer of the Company since January 1, 2014 and the President of First Mid Bank since May 2011. Prior to assuming these positions in the Company, he was the Senior Executive Vice President of the Company beginning in May 2011.
Dively, age 64, is the Chairman of the Board of Directors, President and Chief Executive Officer of the Company since January 1, 2014 and the President of First Mid Bank since May 2011. Prior to assuming these positions in the Company, he was the Senior Executive Vice President of the Company beginning in May 2011.
Lewis, age 43, has been Executive Vice President of the Company since January 2019 and Senior Vice President of the Company and Senior Vice President, Retail Banking Officer of First Mid Bank since September 2014. She served as Vice President, Director of Marketing from 2001 until September 2014.
Lewis, age 44, has been Executive Vice President of the Company since January 2019 and Senior Vice President of the Company and Senior Vice President, Retail Banking Officer of First Mid Bank since September 2014. She served as Vice President, Director of Marketing from 2001 until September 2014.
McRae, age 57, has been Executive Vice President of the Company and Executive Vice President, Chief Lending Officer of First Mid Bank since January 2022. He was Chief Credit Officer from January 2017 to December 2021.
McRae, age 58, has been Executive Vice President of the Company and Executive Vice President, Chief Lending Officer of First Mid Bank since January 2022. He was Chief Credit Officer from January 2017 to December 2021.
The final rule, however, permanently grandfathered into Tier 1 capital of depository institution holding companies with total consolidated assets of less than $15 billion as of December 31, 2009, any trust preferred securities or cumulative perpetual preferred stock issued before May 19, 2010. The Company General.
Relevant to the Company, the final rule permanently grandfathered into Tier 1 capital of depository institution holding companies with total consolidated assets of less than $15 billion as of December 31, 2009 any trust preferred securities or cumulative perpetual preferred stock issued before May 19, 2010. The Company General.
Dean, age 48, has been Executive Vice President of the Company since January 2019 and Senior Vice President of the Company since 2010 and Senior Vice President and Chief Insurance Services Officer of the First Mid Bank and Chief Executive Officer of First Mid Insurance since September 2014.
Dean, age 49, has been Executive Vice President of the Company since January 2019 and Senior Vice President of the Company since 2010 and Senior Vice President and Chief Insurance Services Officer of the First Mid Bank and Chief Executive Officer of First Mid Insurance since September 2014.
After the formal training, the participants continue to expand their learning by participating in follow up cohort groups for the following six months. In 2022, the Company provided leadership training to 20 managers through our Leader of Leaders and Leader of Others programs. Lastly, succession planning is conducted annually for the Company’s most senior leaders and high impact roles.
After the formal training, the participants continue to expand their learning by participating in follow up cohort groups for the following six months. In 2023, the Company provided leadership training to 22 managers through our Leader of Leaders and Leader of Others programs. Lastly, succession planning is conducted annually for the Company’s most senior leaders and high impact roles.
During the years ended December 31, 2022, 2021, and 2020 the Company expensed supervisory fees totaling $868,000, $745,000, and $572,000, respectively. Changes in total expense are due to changes in assessment rates and increases in total assets of First Mid Bank. 9 Capital Requirements.
During the years ended December 31, 2023, 2022, and 2021 the Company expensed supervisory fees totaling $703,000, $868,000, and $745,000, respectively. Changes in total expense are due to changes in assessment rates and increases in total assets of First Mid Bank. 9 Capital Requirements.
As an FDIC-insured institution, banks are required to pay deposit insurance premium assessments to the FDIC. A number of requirements with respect to the FDIC insurance system have affected results, including insurance assessment rates. The Company expensed $1,805,000, $1,604,000 and $1,309,000 for its insurance assessment during 2022, 2021, and 2020 respectively. OCC Assessments.
As an FDIC-insured institution, banks are required to pay deposit insurance premium assessments to the FDIC. A number of requirements with respect to the FDIC insurance system have affected results, including insurance assessment rates. The Company expensed $3,339,000, $1,805,000 and $1,604,000 for its insurance assessment during 2023, 2022, and 2021 respectively. OCC Assessments.
In addition, the Company wholly owns three statutory business trusts, First Mid-Illinois Statutory Trust II (“First Mid Trust II”), Clover Leaf Statutory Trust I ("CLST Trust"), and FBTC Statutory Trust I ("FBTCST I"), all of which are unconsolidated subsidiaries of the Company.
In addition, the Company wholly owns five statutory business trusts, First Mid-Illinois Statutory Trust II (“First Mid Trust II”), Clover Leaf Statutory Trust I ("CLST Trust"), FBTC Statutory Trust I ("FBTCST I"), Blackhawk Statutory Trust I (BHST I), and Blackhawk Statutory Trust II (BHST II) all of which are unconsolidated subsidiaries of the Company.
As described above, First Mid Bank exceeded minimum capital requirements under applicable guidelines as of December 31, 2022. As of December 31, 2022, approximately $82.3 million was available to be paid as dividends to the Company by First Mid Bank.
As described above, First Mid Bank exceeded minimum capital requirements under applicable guidelines as of December 31, 2023. As of December 31, 2023, approximately $82.1 million was available to be paid as dividends to the Company by First Mid Bank.
Talent Engagement During the last four years, the Company has partnered with a trusted industry leader to conduct an annual employee engagement survey. Employee participation in the engagement survey was 98.7% for 2022. The high level of participation in the survey provides the Company confidence that the results are meaningful and that the areas identified as needing improvement are genuine.
Talent Engagement During the last six years, the Company has partnered with a trusted industry leader to conduct an annual employee engagement survey. Employee participation in the engagement survey was 98.4% for 2023. The high level of participation in the survey provides the Company confidence that the results are meaningful and that the areas identified as needing improvement are genuine.
The Federal Reserve Board’s capital guidelines establish the following minimum regulatory capital requirements for bank holding companies for 2019, which include the full phase in of the capital conservation buffer: a total capital to total risk-based capital ratio of not less than 10.50%, a Tier 1 risk-based ratio of not less than 8.50%, a common equity Tier 1 capital ratio of not less than 7.00%, and a Tier 1 leverage ratio of not less than 4.00%.
The Federal Reserve Board’s capital guidelines establish the following minimum regulatory capital requirements for bank holding companies, which include the full phase in of the “capital conservation buffer”: a total capital to total risk-based capital ratio of not less than 10.5%, a Tier 1 risk-based ratio of not less than 8.5%, a common equity Tier 1 capital ratio of not less than 7%, and a Tier 1 leverage ratio of not less than 4%.
Delta Bancshares Company On July 28, 2021, the Company and Brock Sub LLC, a newly formed Delaware limited liability company and wholly-owned subsidiary of the Company (“Delta Merger Sub”), entered into an Agreement and Plan of Merger (the “Delta Merger Agreement”) with Delta Bancshares Company, a Missouri corporation (“Delta”), pursuant to which, among other things, the Company agreed to acquire 100% of the issued and outstanding shares of Delta pursuant to a business combination whereby Delta will merge with and into Merger Sub, whereupon the separate corporate existence of Delta will cease and Merger Sub will continue as the surviving company and a wholly-owned subsidiary of First Mid (the “Delta Merger”).
The Blackhawk Merger closed August 15, 2023 and Blackhawk Bank was merged into First Mid Bank on December 1, 2023. 6 Delta Bancshares Company On July 28, 2021, the Company and Brock Sub LLC, a newly formed Delaware limited liability company and wholly-owned subsidiary of the Company (“Delta Merger Sub”), entered into an Agreement and Plan of Merger (the “Delta Merger Agreement”) with Delta Bancshares Company, a Missouri corporation (“Delta”), pursuant to which, among other things, the Company agreed to acquire 100% of the issued and outstanding shares of Delta pursuant to a business combination whereby Delta will merge with and into Merger Sub, whereupon the separate corporate existence of Delta will cease and Merger Sub will continue as the surviving company and a wholly-owned subsidiary of First Mid (the “Delta Merger”).
Beesley, age 51, has been Executive Vice President of the Company and Chief Trust & Wealth Management Officer of First Mid Bank since March 2015 and First Mid Wealth Management Company since July 2018. He served as Senior Vice President from May 2007 to March 2015. Laurel G.
Beesley, age 52, has been Executive Vice President of the Company and Chief Trust & Wealth Management Officer of First Mid Bank since March 2015 and First Mid Wealth Management Company since July 2018. He served as Senior Vice President from May 2007 to March 2015. Clay M.
The Commitment to the Communities program encourages employees to be engaged in the communities where they live and work. In 2022, the Company’s employees volunteered 15,889 hours to organizations in their communities. The Company also encourages employees to serve in leadership roles in these organizations as part of their professional development.
The Commitment to the Communities program encourages employees to be engaged in the communities where they live and work. In 2023, the Company’s employees volunteered 19,066 hours to organizations in their communities. The Company also encourages employees to serve in leadership roles in these organizations as part of their professional development.
Most lending personnel have signature authority that allows them to lend up to a certain amount based on their own judgment as to the creditworthiness of a borrower.
Most lending personnel have signature authority that allows them to lend up to a certain amount based on their own judgment as to the creditworthiness of a borrower. The amount of the signature authority is based on the lending officers’ experience and training.
The DEI officer reports directly to the CEO. As of December 31, 2022, the Company employed 1070 employees with 95% of those full-time and 5% part-time. The Company’s current employee base include 72% females, 8% minorities, and 2% veterans. The Company’s commitment to diversity resulted in a year over year increase in minorities within its workforce from 6.7% to 8%.
The DEI officer reports directly to the CEO. As of December 31, 2023, the Company employed 1219 employees with 95% of those full-time and 5% part-time. The Company’s current employee base include 70% females, 11% minorities, and 2% veterans. The Company’s commitment to diversity resulted in a year over year increase in minorities within its workforce from 8% to 11%.
The banking regulators established the following minimum capital standards for banks as of 2019, which include the full phase in of the capital conservation buffer in a total capital to total risk-based capital ratio of not less than 10.50%, a Tier 1 risk-based ratio of not less than 8.50%, a common equity Tier 1 capital ratio of not less than 7.00%, and a Tier 1 leverage ratio of not less than 4.00%.
The banking regulators established the following minimum capital standards for banks, which include the full phase in of the “capital conservation buffer”: a total capital to total risk-based capital ratio of not less than 10.5%, a Tier 1 risk-based ratio of not less than 8.5%, a common equity Tier 1 capital ratio of not less than 7%, and a Tier 1 leverage ratio of not less than 4%.
The Company offers insurance products and services to customers through its wholly owned subsidiary, First Mid Insurance Group, Inc. (“First Mid Insurance”). The Company offers trust, farm services, investment services, and retirement planning through its wholly owned subsidiary, First Mid Wealth Management Company. The Company also wholly owns a captive insurance company, First Mid Captive, Inc.
(“First Mid Insurance”). The Company offers trust, farm services, investment services, and retirement planning through its wholly owned subsidiary, First Mid Wealth Management Company. The Company also wholly owns a captive insurance company, First Mid Captive, Inc. through First Mid Bank, the Company owns an investment subsidiary, First Mid Investments, Inc.
As of December 31, 2022, the Company had regulatory capital, calculated on a consolidated basis, in excess of the Federal Reserve Board’s minimum requirements, and its capital ratios exceeded those required for categorization as well-capitalized under the capital adequacy guidelines established by bank regulatory agencies with a total risk-based capital ratio of 15.20%, a Tier 1 risk-based ratio of 12.40%, a common equity Tier 1 capital ratio of 12.03% and a leverage ratio of 9.68%.
As of December 31, 2023, the Company had regulatory capital, calculated on a consolidated basis, in excess of the Federal Reserve Board’s minimum requirements, and its capital ratios exceeded those required for categorization as well-capitalized under the capital adequacy guidelines established by bank regulatory agencies with a total risk-based capital ratio of 14.84%, a Tier 1 risk-based ratio of 12.02%, a common equity Tier 1 capital ratio of 11.62% and a leverage ratio of 9.33%.
Subject to the terms and conditions of the LINCO Merger Agreement, at the effective time of the LINCO Merger, each share of common stock, par value $1.00 per share, of LINCO issued and outstanding immediately prior to the effective time of the LINCO Merger (other than shares held in treasury by LINCO) was converted into and became the right to receive, cash or shares of common stock, par value $4.00 per share, of the Company and cash in lieu of fractional shares, less any applicable taxes required to be withheld, and subject to certain potential adjustments.
Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger, each share of common stock, par value $0.01 per share, of Blackhawk issued and outstanding immediately prior to the effective time of the Merger (other than shares held in treasury by Blackhawk and dissenting shares) were converted into and become the right to receive 1.15 shares of common stock, par value $4.00 per share, of First Mid and cash in lieu of fractional shares, less any applicable taxes required to be withheld, and subject to certain potential adjustments.
Total commercial real estate loans have increased from $907 million at December 31, 2018 to $2.0 billion at December 31, 2022. Of this increase, approximately $773 million was the result of strategic acquisitions during the period. Approximately 65% of the Company’s total revenues were derived from lending activities in the fiscal year ended December 31, 2022.
Total commercial real estate loans have increased from $996 million at December 31, 2019 to $2.4 billion at December 31, 2023. Of this increase, approximately $343 million was the result of strategic acquisitions during the period. Approximately 69% of the Company’s total revenues were derived from lending activities in the fiscal year ended December 31, 2023.
ITEM 1. B USINESS Company and Subsidiaries First Mid Bancshares, Inc. (the “Company”), formerly known as First Mid-Illinois Bancshares, Inc., is a financial holding company. The Company is engaged in the business of banking through its wholly owned subsidiary, First Mid Bank & Trust, N.A. (“First Mid Bank”).
ITEM 1. B USINESS Company and Subsidiaries First Mid Bancshares, Inc. (the “Company”), is a financial holding company. The Company is engaged in the business of banking through its wholly owned subsidiary, First Mid Bank & Trust, N.A. (“First Mid Bank”). The Company offers insurance products and services to customers through its wholly owned subsidiary, First Mid Insurance Group, Inc.
Jason Crowder, age 52 has been Senior Vice President and General Counsel of the Company since August 2019. Prior to joining the Company, he was the Corporate Counsel of Petersen Health Care, Inc., from 2008 to July 2019, and an attorney at Heller, Holmes & Associates from 1996 to 2008.
Prior to joining the Company, he was the Corporate Counsel of Petersen Health Care, Inc., from 2008 to July 2019, and an attorney at Heller, Holmes & Associates from 1996 to 2008. Jordan Read, age 34, has been Senior Vice President and Chief Risk Officer of First Mid Bank since August 2021.
Nonperforming loans were $19.2 million (0.40% of total loans) at December 31, 2022. These percentages have historically compared well with peer financial institutions and continue to do so today. Interest rate and liquidity risk are two other forms of risk embedded in the banking business.
These percentages have historically compared well with peer financial institutions and continue to do so today. Interest rate and liquidity risk are two other forms of risk embedded in the banking business.
The legal lending limit for First Mid Bank was $111.8 million at December 31, 2022. While the underlying nature of lending will result in some amount of loan losses, First Mid's loan loss experience has been good with average net charge offs amounting to $3.6 million (0.12% of total loans) over the past five years.
While the underlying nature of lending will result in some amount of credit losses, First Mid's credit loss experience has been good with average net charge offs amounting to $3.8 million (0.08% of total loans) over the past five years. Nonperforming loans were $20.1 million (0.36% of total loans) at December 31, 2023.
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. 2021 Loan Purchase During 2021, First Mid Bank completed an acquisition of loans in the St.
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. Blackhawk Bancorp, Inc. On March 20, 2023, First Mid Bancshares, Inc.
The new minimum capital level requirements applicable to the Company and First Mid Bank beginning in 2015 were: (i) a new common equity Tier 1 capital ratio of 4.5%; (ii) a Tier 1 capital ratio of 6%; (iii) a total capital ratio of 8%; and (iv) a Tier 1 leverage ratio of 4%.
The minimum capital level requirements applicable to the Company and First Mid Bank are: (i) a common equity Tier 1 capital ratio of 4.5%, plus a 2.5% “capital conservation buffer”, for effectively a minimum requirement of 7%; (ii) a Tier 1 capital ratio of 6%, plus a 2.5% “capital conservation buffer”, for effectively a minimum requirement of 8.5%; (iii) a total capital ratio of 8%, plus a 2.5% “capital conservation buffer”, for effectively a minimum requirement of 10.5%; and (iv) a Tier 1 leverage ratio of 4%.
Jordan Read, age 33, has been Senior Vice President and Chief Risk Officer of First Mid Bank since August 2021. He was Director of Internal Audit of Enterprise Bank and Trust from 2018 to 2021. Megan McElwee, age 35, has been Senior Vice President and Chief Credit Officer since January 2022.
He was Director of Internal Audit of Enterprise Bank and Trust from 2018 to 2021. Megan McElwee, age 36, has been Senior Vice President and Chief Credit Officer since January 2022. She served as Vice President and Director of Credit Administration from 2021 to 2022, Credit Administration Manager from 2017 to 2021, and Credit Officer from 2011 to 2017.
During 2022, First Mid Bank operated branches in the Illinois counties of Adams, Champaign, Christian, Clark, Coles, Cumberland, Douglas, Edgar, Effingham, Jackson, Jefferson, Knox, Lawrence, Macon, Madison, Moultrie, McLean, Peoria, Piatt, Saline, St Clair, Wabash, White and Williamson, and in Missouri counties of Boone, Lincoln, Cole, Camden, Saint Charles and Saint Louis, and the Texas county of Tarrant.
During 2023, First Mid Bank operated branches in the Illinois counties of Adams, Boone, Champaign, Christian, Clark, Coles, Cumberland, Douglas, Dupage, Edgar, Effingham, Jackson, Jefferson, Knox, Lawrence, Macon, Madison, McHenry, McLean, Moultrie, Peoria, Piatt, Saline, St.
The IMLAFA requires U.S. financial institutions to adopt policies and procedures to combat money laundering and grants the Secretary of the Treasury broad authority to establish regulations and to impose requirements and restrictions on financial institutions’ operations. The Company has established policies and procedures for compliance with the IMLAFA and the related regulations.
The IMLAFA contains anti-money laundering measures affecting insured depository institutions, broker-dealers, and certain other financial institutions. The IMLAFA requires U.S. financial institutions to adopt policies and procedures to combat money laundering and grants the Secretary of the Treasury broad authority to establish regulations and to impose requirements and restrictions on financial institutions’ operations.
Dively (63) Chairman of the Board of Directors, President and Chief Executive Officer Michael L. Taylor (54) Senior Executive Vice President and Chief Operating Officer Matthew K. Smith (48) Executive Vice President and Chief Financial Officer Eric S. McRae (57) Executive Vice President Bradley L. Beesley (51) Executive Vice President Laurel G. Allenbaugh (62) Executive Vice President Clay M.
Dively (64) Chairman of the Board of Directors, President and Chief Executive Officer Michael L. Taylor (55) Senior Executive Vice President and Chief Operating Officer Matthew K. Smith (49) Executive Vice President and Chief Financial Officer Eric S. McRae (58) Executive Vice President Bradley L. Beesley (52) Executive Vice President Clay M. Dean (49) Executive Vice President Amanda D.
First Mid Bank competes for commercial and individual deposits and loans with many Illinois, Missouri and Texas banks, savings and loan associations, and credit unions.
Markets and Competition The Company has active competition in all areas in which First Mid Bank does business. First Mid Bank competes for commercial and individual deposits and loans with many Illinois, Missouri, Wisconsin and Texas banks, savings and loan associations, and credit unions.
Each branch primarily serves the community in which it is located. First Mid Bank served forty-seven different communities with fifty-two separate locations in Illinois, thirteen locations in Missouri, one location in Texas, and a loan production office in Indiana. Website The Company maintains a website at www.firstmid.com.
First Mid Bank served sixty-four different communities with fifty-nine separate locations in Illinois, eighteen locations in Missouri, three locations in Wisconsin, one location in Texas, and one loan production office in Indiana. Website The Company maintains a website at www.firstmid.com.
Rhonda Gatons, age 51, has been Execuitve Vice President of the Company since April of 2022 and Director of Human Resources since March 2016. Prior to joining the Company, she was the Director of Human Resources at Midland States Bank. David Hiden, age 60, has been Senior Vice President, Chief Information Officer of the Company since July 2018.
Rhonda Gatons, age 52, has been Executive Vice President of the Company since April of 2022 and Director of Human Resources since March 2016. Prior to joining the Company, she was the Director of Human Resources at Midland States Bank. Stas R. Wolak, age 48, has been Executive Vice President and the Chief Retail Banking Officer since February 2024.
Generally, the Act is effective the day after it was signed into law, but different effective dates apply to specific sections of the law.
Dodd-Frank Wall Street Reform and Consumer Protection Act The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) was signed into law on July 21, 2010. Generally, the Act is effective the day after it was signed into law, but different effective dates apply to specific sections of the law.
Dean (48) Executive Vice President Amanda D. Lewis (43) Executive Vice President Rhonda Gatons (51) Executive Vice President David Hiden (60) Senior Vice President Jason Crowder (52) Senior Vice President Jordan Read (33) Senior Vice President Megan McElwee (35) Senior Vice President Anya Schuetz (48) Vice President Joseph R.
Lewis (44) Executive Vice President Rhonda Gatons (52) Executive Vice President Stas R. Wolak (48) Executive Vice President David Hiden (61) Senior Vice President Jason Crowder (53) Senior Vice President Jordan Read (34) Senior Vice President Megan McElwee (36) Senior Vice President Anya Schuetz (49) Senior Vice President Jeremy R. Frieburg (43) Senior Vice President Joseph R.
The GLB Act also amended the Investment Advisers Act of 1940 to require the registration of banks that act as investment advisers for mutual funds. The Company believes that it has taken the necessary actions to comply with these requirements of the GLB Act and the regulations adopted under them.
The GLB Act also amended the Investment Advisers Act of 1940 to require the registration of banks that act as investment advisers for mutual funds.
The new capital conservation buffer requirement was phased in beginning in January 2016 at 0.625% of risk weighted assets and increased by that amount each year until fully implemented in January 2019. An institution is subject to limitations on paying dividends, engaging in share repurchases and paying discretionary bonuses if its capital level falls below the buffer amount.
An institution is subject to limitations on paying dividends, engaging in share repurchases and paying discretionary bonuses if its capital level falls below the buffer amount.
On February 14, 2022, the Company acquired Jefferson Bank, which was merged into First Mid Bank on June 10, 2022.
On August 15, 2023, the Company acquired Blackhawk Bank, which was merged into First Mid Bank on December 1, 2023.
Management provided complete transparency to team members by publishing each job grade and pay grade through a job value matrix. In 2022 the Company addressed inflation by awarding employees making $70,000 or less a 3% wage increase, so the Company is well positioned to retain its workforce.
The Company invested in its workforce during 2023 by increasing merit raises and increasing the employer's portion of group insurance expense. In 2022, the Company addressed inflation by awarding employees making $70,000 or less a 3% wage increase outside of the normal annual wage review, so the Company is well positioned to retain its workforce.
The Company has designated an officer solely responsible for ensuring compliance with existing regulations and monitoring changes to the regulations as they occur. Dodd-Frank Wall Street Reform and Consumer Protection Act The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) was signed into law on July 21, 2010.
The Company has established policies and procedures for compliance with the IMLAFA and the related regulations. The Company has designated an officer solely responsible for ensuring compliance with existing regulations and monitoring changes to the regulations as they occur.
The Company continually reviews its benefits compared to peers in the market and make changes as needed to ensure it remains competitive.
The Company continually reviews its benefits compared to peers in the market and makes changes as needed to ensure it remains competitive. In 2023, the Company made several enhancements to compensation and benefits. For compensation, the Company increased the starting rate of pay by $0.50 per hour which impacted several of our entry level employees.
The amount of the signature authority is based on the lending officers’ experience and training. 5 The Senior Loan Committee, consisting of the most experienced lenders within the organization, must approve all underwriting decisions in excess of $10 million and up to $30 million. The Board of Directors must approve all underwriting decisions in excess of $30 million.
The Senior Loan Committee, consisting of the senior management, must approve all underwriting decisions in excess of $10 million and up to $30 million. The Board of Directors must approve all underwriting decisions in excess of $30 million. The legal lending limit for First Mid Bank was $128.1 million at December 31, 2023.
Another purpose of the EFC is to raise money and supplies for local charities through events that are sponsored by the Company and staffed by its employees. The Company’s CEO has an annual award called the Chairman’s Award for Excellence which allows employees to nominate peers who have gone above and beyond.
The ability to target areas for improvement has resulted in the overall engagement score increasing each year. The Company’s CEO has an annual award called the Chairman’s Award for Excellence which allows employees to nominate peers who have gone above and beyond.
This final rule was subsequently adopted by the OCC and the FDIC. The final rule included new risk-based capital and leverage ratios, which were phased in from 2015 to 2019, and refined the definition of what constitutes “capital” for purposes of calculating those ratios.
This final rule was subsequently adopted by the OCC and the FDIC. The final rule includes revised risk-based capital and leverage ratios.
On an aggregate basis, the total consideration paid by the Company at the closing of the LINCO Merger was $103.5 million in cash and 1,262,246 shares of the Company’s common stock, provided that the shareholders of LINCO have collectively elected pursuant to the LINCO Merger Agreement to receive varying amounts of cash or shares of common stock of the Company as consideration in the Merger.
On an aggregate basis, the total consideration payable by First Mid at the closing of the Merger to Blackhawk’s shareholders and equity award holders was 3,290,222 shares of First Mid common stock valued at $93.51 million and $1,928 of cash in lieu of fractional shares.
Anti-Terrorism Legislation The USA PATRIOT Act of 2001 included the International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001 (the “IMLAFA”). The IMLAFA contains anti-money laundering measures affecting insured depository institutions, broker-dealers, and certain other financial institutions.
The Company believes that it has taken the necessary actions to comply with these requirements of the GLB Act and the regulations adopted under them. 7 Anti-Terrorism Legislation The USA PATRIOT Act of 2001 included the International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001 (the “IMLAFA”).
She served as Vice President and Director of Credit Administration from 2021 to 2022, Credit Administration Manager from 2017 to 2021, and Credit Officer from 2011 to 2017. Anya Schuetz, age 48, has been Vice President and Director of Project Management since 2013. 12
Anya Schuetz, age 49, has been Vice President and Director of Project Management since 2013. Jeremy R. Frieburg, age 43, has been Senior Vice President and the Chief Information Officer since February 2024. Prior to joining the Company, he was a Chief Information Officer for INB, N.A. from 2021 to 2024.
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The ability to target areas for improvement has resulted in the overall engagement score increasing each year. The Company also has an Employee First Committee (“EFC”) whose purpose is to improve employee satisfaction and fulfillment by promoting fun, fellowship and generosity within the Company and the community across the Company footprint.
Added
In addition, the Company provided more than 50 hourly and salaried employees with spot bonuses in recognition of significant projects, as well as provided over 100 employees with a bonus for the extra work during an acquisition. For benefits, the Company provided a third medical plan option with lower deductibles for employees.
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The Company invested in its workforce during 2021 by readjusting job grade and pay ranges to better align positions with current market trends. Each position within the Company is placed in a job grade based on the necessary skill and experience needed to succeed in the position.
Added
The employee premiums for the dependant/family coverage tiers were significantly lowered for one of the high deductible medical plans. The third medical plan employee premiums increased with an extremely small 0.01% increase.
Removed
During 2022, the Company’s net interest margin on a tax-effected basis decreased to 3.13% from 3.21% in 2021 primarily due to less accretion income and lower interest rates in a more competitive and challenging interest rate environment. Markets and Competition The Company has active competition in all areas in which First Mid Bank does business.
Added
Two other enhancements were provided: employee's vacation time was amended to allow for a year-end rollover option and the Company increased the monetary gift level for employee's service anniversaries. The Company continually reviews its benefits compared to peers in the market and makes changes as needed to ensure it remains competitive.
Removed
Louis Metro market totaling $208 million. There were no loans purchased with deteriorated credit. First Mid Bank also assumed $219 million of related customer deposits and recorded a core deposit intangible asset of approximately $4.9 million that is being amortized on an accelerated basis over ten years. LINCO Bancshares, Inc.
Added
During 2023, the Company’s net interest margin on a tax-effected basis decreased to 3.05% as of December 31, 2023 from 3.13% in December 31, 2022 primarily due to higher interest rates driving increased funding costs at a rate faster than the repricing of earning assets.
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In addition, immediately prior to the closing of the LINCO merger, LINCO paid a special dividend to its shareholders in the aggregate amount of $13 million. The LINCO Merger closed on February 22, 2021 and Providence Bank was merged into First Mid Bank on May 15, 2021.
Added
Clair, Wabash, White, Williamson, and Winnebago, and in Missouri counties of Boone, Camden, Cole, Lincoln, Saint Charles and Saint Louis, and the Wisconsin county of Rock, and the Texas county of Tarrant. Each branch primarily serves the community in which it is located.
Removed
The rule also established a “capital conservation buffer” of 2.5% above the new regulatory minimum capital requirements, which must consist entirely of common equity Tier 1 capital and will result in the following minimum ratios: (i) a common equity Tier 1 capital ratio of 7.0%, (ii) a Tier 1 capital ratio of 8.5%, and (iii) a total capital ratio of 10.5%.
Added
Prior to joining the Company, he was the Sales and Client Experience Director at PNC Bank from 2013 to 2023. David Hiden, age 61, has been Senior Vice President since July 2018. He was Chief Information Officer until February 2024. 11 Jason Crowder, age 53 has been Senior Vice President and General Counsel of the Company since August 2019.
Removed
The final rule also made three changes to the proposed rule of June 2012 that impacted the Company. First, the proposed rule required banking organizations to include accumulated other comprehensive income (“AOCI”) in common equity tier 1 capital. AOCI includes accumulated unrealized gains and losses on certain assets and liabilities that have not been included in net income.
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Under existing general risk-based capital rules, most components of AOCI are not included in a banking organization's regulatory capital calculations.
Removed
The final rule allowed community banking organizations to make a one-time election not to include these additional components of AOCI in regulatory capital and instead use the existing treatment under the general risk-based capital rules that excludes most AOCI components from regulatory capital. The Company made this election.
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Second, the proposed rule modified the risk-weight framework applicable to residential mortgage exposures to require banking organizations to divide residential mortgage exposure into two categories in order to determine the applicable risk weight. The final rule, however, retained the existing treatment for residential mortgage exposures under the general risk-based capital rules.

… 2 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn particular, we may experience financial losses due to various operational factors impacting us or our borrowers, customers, or business partners, including but not limited to: • credit losses resulting from financial stress being experienced by our borrowers as a result of the outbreak and related governmental actions, particularly in the hospitality, energy, retail, and restaurant industries, but across other industries as well; • declines in collateral values; • third party disruptions, including outages at network providers and other suppliers; • increased cyber and payment fraud risk, as cybercriminals attempt to profit from the disruption, given increased online and remote activity; and • operational failures due to changes in our normal business practices necessitated by the outbreak and related governmental actions.
Biggest changeIn particular, we experienced financial losses due to various operational factors impacting us or our borrowers, customers, or business partners, including but not limited to: • declines in collateral values; • third party disruptions, including outages at network providers and other suppliers; • increased cyber and payment fraud risk, as cybercriminals attempt to profit from the disruption, given increased online and remote activity; and Even though the COVID 19 impact has lessened, the Company may continue to experience adverse impacts to our business as a result of the virus’s global economic impact, including the availability of credit, adverse impacts on our liquidity and any recession that has occurred or may occur in the future.
(See “Liquidity” herein for management’s actions to mitigate this risk.) 13 If the Company were unable to borrow funds through access to capital markets, it may not be able to meet the cash flow requirements of its depositors, creditors, and borrowers, or the operating cash needed to fund corporate expansion and other corporate activities.
(See “Liquidity” herein for management’s actions to mitigate this risk.) If the Company were unable to borrow funds through access to capital markets, it may not be able to meet the cash flow requirements of its depositors, creditors, and borrowers, or the operating cash needed to fund corporate expansion and other corporate activities.
Conditions such as inflation, recession, unemployment, changes in interest rates, money supply and other factors beyond the Company’s control may adversely affect its asset quality, deposit levels and loan demand and, therefore, its earnings. The Company’s profitability depends significantly on economic conditions in the geographic region in which it operates.
Conditions such as inflation, recession, unemployment, changes in 13 interest rates, money supply and other factors beyond the Company’s control may adversely affect its asset quality, deposit levels and loan demand and, therefore, its earnings. The Company’s profitability depends significantly on economic conditions in the geographic region in which it operates.
The Company also faces competition from many other types of financial institutions, including, without limitation, savings and loans, credit unions, finance companies, brokerage firms, insurance companies, and other financial intermediaries. The financial services industry could become even more competitive as a result of legislative and regulatory changes and continued consolidation. 16
The Company also faces competition from many other types of financial institutions, including, without limitation, savings and loans, credit unions, finance companies, brokerage firms, insurance companies, and other financial intermediaries. The financial services industry could become even more competitive as a result of legislative and regulatory changes and continued consolidation.
Many of these transactions expose the Company to credit risk in the event of default of its counterparty or client. Any such losses could materially and adversely affect the Company’s results of operations. 14 The Company is subject to Environmental, Social and Governance (“ESG”) risks that could adversely affect its reputation and the market price of its securities .
Many of these transactions expose the Company to credit risk in the event of default of its counterparty or client. Any such losses could materially and adversely affect the Company’s results of operations. The Company is subject to Environmental, Social and Governance (“ESG”) risks that could adversely affect its reputation and the market price of its securities .
This could have a material adverse impact on the Company’s accumulated other comprehensive loss and shareholders’ equity depending upon the direction of the fluctuations. Furthermore, future downgrades or defaults in these securities could result in future classifications as other-than-temporarily impaired.
This could have a material adverse impact on the Company’s accumulated other comprehensive loss and shareholders’ equity depending upon the direction of the fluctuations. 12 Furthermore, future downgrades or defaults in these securities could result in future classifications as other-than-temporarily impaired.
Overall economic conditions affecting businesses and consumers, including the current difficult economic conditions and market disruptions, could impact the Company’s credit losses. In addition, real estate valuations could also impact the Company’s credit losses as the Company maintains $3.3 billion in loans secured by commercial, agricultural, and residential real estate.
Overall economic conditions affecting businesses and consumers, including the current difficult economic conditions and market disruptions, could impact the Company’s credit losses. In addition, real estate valuations could also impact the Company’s credit losses as the Company maintains $3.8 billion in loans secured by commercial, agricultural, and residential real estate.
A significant decline in real estate values could have a negative effect on the Company’s financial condition and results of operations. In addition, the Company’s total loan balances by industry exceeded 25% of total risk-based capital for each of four industries as of December 31, 2022. A listing of these industries is contained in under “Item 7.
A significant decline in real estate values could have a negative effect on the Company’s financial condition and results of operations. In addition, the Company’s total loan balances by industry exceeded 25% of total risk-based capital for each of four industries as of December 31, 2023. A listing of these industries is contained in under “Item 7.
If the Company’s stock price declines from levels at December 31, 2022, management will evaluate the goodwill balance for impairment, and if the values of the business has declined, the Company could recognize an impairment charge for its goodwill. Management performed its annual goodwill impairment assessment as of September 30, 2022.
If the Company’s stock price declines from levels at December 31, 2023, management will evaluate the goodwill balance for impairment, and if the values of the business has declined, the Company could recognize an impairment charge for its goodwill. Management performed its annual goodwill impairment assessment as of September 30, 2023.
Increases in commercial and consumer delinquency levels or declines in real estate market values would require increased net charge-offs and increases in the allowance for loan and lease losses, which could have a material adverse effect on our business, financial condition and results of operations and prospects.
Increases in commercial and consumer delinquency levels or declines in real estate market values would require increased net charge-offs and increases in the allowance for credit losses, which could have a material adverse effect on our business, financial condition and results of operations and prospects.
In addition, the transition to increased work-from-home arrangements, which is likely to survive the COVID-19 pandemic for many companies, may exacerbate the challenges of attracting and retaining talented and diverse employees as job markets may be less constrained by physical geography.
In addition, increased work-from-home arrangements, may exacerbate the challenges of attracting and retaining talented and diverse employees as job markets may be less constrained by physical geography.
The Company may issue additional common stock or other equity securities in the future which could dilute the ownership interest of existing stockholders .
The ongoing recovery or a 14 resurgence of COVID 19 could have a material impact on the Company’s results of operations and heighten other of our known risks. The Company may issue additional common stock or other equity securities in the future which could dilute the ownership interest of existing stockholders .
COVID-19 has impacted, and is likely to further adversely impact, the workforce and operations of the Company, and the operations of our borrowers, customers, and business partners.
Other Business Risks The COVID-19 pandemic had a negative impact on the economy and the Company, it's workforce, and the operations of our borrowers, customers, and business partners.
Removed
Changes in the method pursuant to which the LIBOR and other benchmark rates are determined could adversely impact the Company’s business and results of operations .
Removed
Our floating-rate funding, certain hedging transactions and certain of the products that we offer, such as floating-rate loans and mortgages, determine the applicable interest rate or payment amount by reference to a benchmark rate, such as LIBOR, or to an index, currency, basket, or other financial metric.
Removed
LIBOR and certain other benchmark rates are the subject of recent national, international, and other regulatory guidance and proposals for reform. In July 2017, the Chief Executive of the Financial Conduct Authority (“FCA”) announced that the FCA intends to stop persuading or compelling banks to submit rates for the calculation of LIBOR after 2021.
Removed
However, the administrator of LIBOR has proposed to extend publication of the most commonly used U.S. Dollar LIBOR settings until June 30, 2023 and will cease publishing other LIBOR settings on December 31, 2021. The U.S. federal banking agencies have issued guidance strongly encouraging banking organizations to cease using the U.S.
Removed
Dollar LIBOR as a reference rate in “new” contracts as soon as practicable and in any event by December 31, 2021.
Removed
It is not possible to predict whether LIBOR will continue to be viewed as an acceptable market benchmark, which rate or rates may become accepted alternatives to LIBOR, or what the effect of any such changes in views or alternatives may be on the markets for LIBOR-linked financial instruments.
Removed
While there is no consensus on what rate or rates may become accepted alternatives to LIBOR, the Alternative Reference Rates Committee, a steering committee comprised of U.S. financial market participants, selected by the Federal Reserve Bank of New York, started in May 2018 to publish the Secured Overnight Financing Rate (“SOFR”) as an alternative to LIBOR.
Removed
SOFR is a broad measure of the cost of overnight borrowings collateralized by Treasury securities that was selected by the Alternative Reference Rate Committee due to the depth and robustness of the Treasury repurchase market. At this time, it is impossible to predict whether SOFR will become a accepted alternative to LIBOR.
Removed
The discontinuation of LIBOR, changes in LIBOR, or changes in market perceptions of the acceptability of LIBOR as a benchmark could result in changes to our risk exposures (for example, if the anticipated discontinuation of LIBOR adversely affects the availability or cost of floating-rate funding and, therefore, our exposure to fluctuations in interest rates) or otherwise result in losses on a product or having to pay more or receive less on securities that we own or have issued.
Removed
In addition, such uncertainty could result in pricing volatility and increased capital requirements, loss of market share in certain products, adverse tax or accounting impacts, and compliance, legal and operational costs and risks associated with client disclosures, discretionary actions taken or negotiation of fallback provisions, systems disruption, business continuity, and model disruption. 15 Other Business Risks The ongoing COVID-19 pandemic and the measures intended to prevent its spread have had and may continue to have an adverse effect on the Company's operations, results of operations and financial condition, and the severity of these adverse effects depend on future developments which are highly uncertain and difficult to predict.
Removed
The global health concerns related to COVID-19 and government actions implemented to reduce the spread of the virus have had an adverse impact on the macroeconomic environment. COVID-19 has significantly increased economic uncertainty and reduced economic activity.
Removed
The outbreak has resulted in authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place or total lock-down orders and business limitations and shutdowns. These measures have significantly contributed to rising unemployment and negatively impacted consumer and business spending.
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The United States government has taken steps to mitigate some of the more severe anticipated economic effects of the virus, including the passage of the CARES Act, but there is no assurance that these steps will be effective or achieve the desired positive economic results in a timely fashion.
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These factors may remain prevalent for a significant period and may continue to adversely affect the Company, results of operations and financial condition even after the COVID-19 outbreak has subsided.
Removed
The extent to which the coronavirus outbreak impacts the Company’s operations, results of operations and financial condition will depend on future developments, which are highly uncertain and are difficult to predict, including, but not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume.
Removed
Even after the COVID-19 outbreak has subsided, we may continue to experience adverse impacts to our business as a result of the virus’s global economic impact, including the availability of credit, adverse impacts on our liquidity and any recession that has occurred or may occur in the future.
Removed
There are no comparable recent events that provide guidance as to the effect the spread of COVID-19 as a global pandemic may have, and, as a result, the ultimate impact of the outbreak is highly uncertain and subject to change.
Removed
The full extent of the impacts on the Company’s operations or the global economy as a whole is not yet known. However, the effects could have a material impact on the Company’s results of operations and heighten other of our known risks.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeFirst Mid Bank also conducts business through numerous facilities, owned and leased, located in twenty-four counties throughout Illinois, six throughout Missouri, and one county in Texas. Of the sixty-six other banking offices operated by First Mid Bank, forty-nine are owned and seventeen are leased from non-affiliated third parties.
Biggest changeFirst Mid Bank also conducts business through numerous facilities, owned and leased, located in twenty-eight counties throughout Illinois, six throughout Missouri, one county in Wisconsin, and one county in Texas. Of the eighty-one other banking offices operated by First Mid Bank, sixty-three are owned and eighteen are leased from non-affiliated third parties.
The net investment of the Company and subsidiaries in real estate and equipment at December 31, 2022 was $90.5 million.
The net investment of the Company and subsidiaries in real estate and equipment at December 31, 2023 was $101.4 million.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe following table summarizes share repurchase activity for the fourth quarter of 2022: ISSUER PURCHASES OF EQUITY SECURITIES Period (a) Total Number of Shares Purchased (b) Average Price Paid per Share (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (d) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs at End of Period October 1, 2022 – October 31, 2022 — $ — — $ 4,543,000 November 1, 2022 – November 30, 2022 — — — 4,543,000 December 1, 2022 – December 31, 2022 10,385 31.75 10,385 4,066,000 Total 10,385 $ 31.75 10,385 $ 4,066,000 All of the repurchase activity that occurred during 2022 resulted from shares withheld to cover taxes on employee stock vesting.
Biggest changeFor further discussion of the Bank’s dividend restrictions, see Item1 – “Business” – “First Mid Bank” – “Dividends” and Note 16 – “Dividend Restrictions” herein. 16 The following table summarizes share repurchase activity for the fourth quarter of 2023: ISSUER PURCHASES OF EQUITY SECURITIES Period (a) Total Number of Shares Purchased (b) Average Price Paid per Share (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (d) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs at End of Period October 1, 2023 – October 31, 2023 — $ — — $ 4,061,000 November 1, 2023 – November 30, 2023 — — — 4,061,000 December 1, 2023 – December 31, 2023 13,311 34.65 13,311 3,600,000 Total 13,311 $ 34.65 13,311 $ 3,600,000 All of the repurchase activity that occurred during 2023 resulted from shares withheld to cover taxes on employee stock vesting.
The Company’s shareholders are entitled to receive dividends as are declared by the Board of Directors, which considered quarterly payment of dividends during 2022. The ability of the Company to pay dividends, as well as fund its operations, is dependent upon receipt of dividends from First Mid Bank.
The Company’s shareholders are entitled to receive dividends as are declared by the Board of Directors, which considered quarterly payment of dividends during 2023. The ability of the Company to pay dividends, as well as fund its operations, is dependent upon receipt of dividends from First Mid Bank.
There were no other shares repurchased during 2022. Since August 5, 1998, the Board of Directors has approved repurchase programs pursuant to which the Company may repurchase a total of approximately $76.7 million of the Company’s common stock. ITEM 6. [Reserved] 17
There were no other shares repurchased during 2023. Since August 5, 1998, the Board of Directors has approved repurchase programs pursuant to which the Company may repurchase a total of approximately $76.7 million of the Company’s common stock. ITEM 6. [Reserved]
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 Item1 – “Business” – “First Mid Bank” – “Dividends” and Note 16 – “Dividend Restrictions” herein.
Regulatory authorities limit the amount of dividends that can be paid by First Mid Bank without prior approval from such authorities.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe Company’s average balances, fully tax equivalent interest income and interest expense, and rates earned or paid for major balance sheet categories are set forth in the following table (dollars in thousands): Year Ended Year Ended Year Ended December 31, 2022 December 31, 2021 December 31, 2020 Average Average Average Average Average Average Balance Interest Rate Balance Interest Rate Balance Interest Rate Assets Interest-bearing deposits $ 56,517 $ 492 0.87 % $ 268,523 $ 357 0.13 % $ 140,470 $ 274 0.19 % Federal funds sold 5,772 113 1.96 % 1,335 — 0.03 % 1,149 3 0.24 % Certificates of deposit investments 1,756 37 2.10 % 2,606 56 2.13 % 3,771 84 2.23 % Investment securities Taxable 1,053,511 20,595 1.95 % 923,600 15,598 1.69 % 545,525 11,376 2.09 % Tax-exempt (Municipals)(TE)(1) 328,832 11,121 3.38 % 299,833 9,264 3.09 % 200,128 7,075 3.54 % Loans (TE)(1)(2)(3) 4,518,566 186,697 4.13 % 3,778,174 160,362 4.24 % 3,046,814 127,552 4.19 % Total earning assets 5,964,954 219,055 3.67 % 5,274,071 185,637 3.51 % 3,937,857 146,364 3.72 % Cash and due from banks 123,306 95,902 87,194 Premises and equipment 88,744 79,913 59,068 Other assets 439,545 333,115 255,184 Allowance for credit losses (58,876 ) (53,188 ) (37,343 ) Total assets $ 6,557,673 $ 5,729,813 $ 4,301,960 Liabilities and stockholders' equity Deposits: Demand deposits, interest-bearing $ 2,598,480 13,709 0.53 % $ 2,217,281 4,258 0.19 % $ 1,557,264 3,732 0.24 % Savings deposits 666,334 570 0.09 % 611,379 487 0.08 % 469,276 426 0.09 % Time deposits 655,240 4,534 0.69 % 671,056 4,292 0.64 % 531,834 8,593 1.62 % Total interest-bearing deposits 3,920,054 18,813 0.48 % 3,499,716 9,037 0.26 % 2,558,374 12,751 0.50 % Securities sold under agreements to repurchase 202,242 1,795 0.89 % 173,762 231 0.13 % 219,298 488 0.22 % FHLB advances 276,401 6,184 2.24 % 107,518 1,514 1.41 % 106,688 1,851 1.73 % Federal funds purchased 481 9 1.87 % — — — % 525 10 1.90 % Subordinated debt 94,471 3,945 4.18 % 94,321 3,939 4.18 % 22,403 931 4.16 % Junior subordinated debentures 19,275 868 4.50 % 19,105 541 2.83 % 18,936 682 3.60 % Other debt 14 — — % — — — % 656 16 2 % Total borrowings 592,884 12,801 2.16 % 394,706 6,225 1.58 % 368,506 3,978 1.08 % Total interest-bearing liabilities 4,512,938 31,614 0.70 % 3,894,422 15,262 0.39 % 2,926,880 16,729 0.57 % Demand deposits 1,356,912 1,164,877 777,435 Other liabilities 46,811 56,388 48,518 Stockholders’ equity 641,012 614,126 549,127 Total liabilities and stockholders' equity $ 6,557,673 $ 5,729,813 $ 4,301,960 Net interest income $ 187,441 $ 170,375 $ 129,635 Net interest spread 2.97 % 3.12 % 3.15 % Impact of non-interest-bearing funds 0.16 % 0.09 % 0.12 % TE net yield on interest-earning assets 3.13 % 3.21 % 3.27 % (1) Tax-exempt income is shown on a fully tax equivalent basis.
Biggest changeThe 20 Company’s average balances, fully tax equivalent interest income and interest expense, and rates earned or paid for major balance sheet categories are set forth in the following table (dollars in thousands): Year Ended Year Ended Year Ended December 31, 2023 December 31, 2022 December 31, 2021 Average Average Average Average Average Average Balance Interest Rate Balance Interest Rate Balance Interest Rate Assets Interest-bearing deposits $ 82,640 $ 5,107 6.18 % $ 56,517 $ 492 0.87 % $ 268,523 $ 357 0.13 % Federal funds sold 8,299 419 5.05 % 5,772 113 1.96 % 1,335 — 0.03 % Certificates of deposit investments 1,822 98 5.37 % 1,756 37 2.10 % 2,606 56 2.13 % Investment securities Taxable 964,898 24,307 2.52 % 1,053,511 20,595 1.95 % 923,600 15,598 1.69 % Tax-exempt (Municipals)(TE)(1) 276,417 9,889 3.58 % 328,832 11,121 3.38 % 299,833 9,264 3.09 % Loans (TE)(1)(2)(3) 5,079,949 263,406 5.19 % 4,518,566 186,697 4.13 % 3,778,174 160,362 4.24 % Total earning assets 6,414,025 303,226 4.73 % 5,964,954 219,055 3.67 % 5,274,071 185,637 3.51 % Cash and due from banks 133,237 123,306 95,902 Premises and equipment 94,897 88,744 79,913 Other assets 520,944 439,545 333,115 Allowance for credit losses (62,878 ) (58,876 ) (53,188 ) Total assets $ 7,100,225 $ 6,557,673 $ 5,729,813 Liabilities and stockholders' equity Deposits: Demand deposits, interest-bearing $ 2,618,452 47,939 1.83 % $ 2,598,480 13,709 0.53 % $ 2,217,281 4,258 0.19 % Savings deposits 663,760 739 0.11 % 666,334 570 0.09 % 611,379 487 0.08 % Time deposits 961,162 28,616 2.98 % 655,240 4,534 0.69 % 671,056 4,292 0.64 % Total interest-bearing deposits 4,243,374 77,294 1.82 % 3,920,054 18,813 0.48 % 3,499,716 9,037 0.26 % Securities sold under agreements to repurchase 225,307 6,565 2.91 % 202,242 1,795 0.89 % 173,762 231 0.13 % FHLB advances 462,197 16,779 3.63 % 276,401 6,184 2.24 % 107,518 1,514 1.41 % Federal funds purchased 192 10 5.21 % 481 9 2 % — — — Subordinated debt 99,638 4,196 4.18 % 94,471 3,945 4.18 % 94,321 3,939 4.18 % Junior subordinated debentures 21,337 1,859 8.87 % 19,275 868 4.50 % 19,105 541 2.83 % Other debt — — — % 14 — — % — — — % Total borrowings 808,671 29,409 3.64 % 592,884 12,801 2.16 % 394,706 6,225 1.58 % Total interest-bearing liabilities 5,052,045 106,703 2.11 % 4,512,938 31,614 0.70 % 3,894,422 15,262 0.39 % Demand deposits 1,312,023 1,356,912 1,164,877 Other liabilities 53,838 46,811 56,388 Stockholders’ equity 682,319 641,012 614,126 Total liabilities and stockholders' equity $ 7,100,225 $ 6,557,673 $ 5,729,813 Net interest income $ 196,523 $ 187,441 $ 170,375 Net interest spread 2.62 % 2.97 % 3.12 % Impact of non-interest-bearing funds 0.43 % 0.16 % 0.09 % TE net yield on interest-earning assets 3.05 % 3.13 % 3.21 % (1) Tax-exempt income is shown on a fully tax equivalent basis.
The Dividend Reinvestment Plan (“DRIP”) was effective as of October 1994. The purpose of the DRIP is to provide participating stockholders with a simple and convenient method of investing cash dividends paid by the Company on its common and preferred shares into newly issued common shares of the Company.
Dividend Reinvestment Plan. The Dividend Reinvestment Plan (“DRIP”) was effective as of October 1994. The purpose of the DRIP is to provide participating stockholders with a simple and convenient method of investing cash dividends paid by the Company on its common and preferred shares into newly issued common shares of the Company.
Additional factors considered by management in evaluating the overall adequacy of the allowance include historical net loan 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.
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.
As a result of the Company’s acquisition activity, goodwill, an intangible asset with an indefinite life, is reflected on the balance sheets. Goodwill is evaluated for impairment annually, unless there are factors present that indicate a potential impairment, in which case, the goodwill impairment test is performed more frequently than annually. Fair Value Measurements.
As a result of the Company’s acquisition activity, goodwill, an intangible asset with an indefinite life, is reflected on the balance sheets. Goodwill is evaluated for impairment annually, unless there are factors present that indicate a potential impairment, in which case, the goodwill impairment test is performed more frequently than annually. 19 Fair Value Measurements.
Repurchase Agreements and Other Borrowings Securities sold under agreements to repurchase are short-term obligations of First Mid Bank. These obligations are collateralized with certain government securities that are direct obligations of the United States or one of its agencies. These retail repurchase agreements are a cash management service to its corporate customers.
Repurchase Agreements and Other Borrowings 30 Securities sold under agreements to repurchase are short-term obligations of First Mid Bank. These obligations are collateralized with certain government securities that are direct obligations of the United States or one of its agencies. These retail repurchase agreements are a cash management service to its corporate customers.
In total cash and cash equivalents decreased by $16.2 million from year-end 2021. For the year ended December 31, 2021, net cash of $69.6 million was provided from operating activities, $482.5 million was used in investing activities, and $164.2 million was provided by financing activities. In total cash and cash equivalents decreased by $248.7 million from year-end 2020.
For the year ended December 31, 2021, net cash of $69.6 million was provided from operating activities, $482.5 million was used in investing activities, and $164.2 million was provided by financing activities. In total cash and cash equivalents decreased by $248.7 million from year-end 2020.
If the estimated value of investments is less than the cost or amortized cost, the Company evaluates whether an event or change in circumstances has occurred that may have a significant adverse effect on the fair value of the investment.
If the estimated value of investments is less than the cost or amortized 18 cost, the Company evaluates whether an event or change in circumstances has occurred that may have a significant adverse effect on the fair value of the investment.
Beginning in mid-2021, shares for dividend reinvestment were purchased in the open market instead of being issued by the Company. 34 Stock Incentive Plan. At the Annual Meeting of Stockholders held April 26, 2017, the stockholders approved the 2017 Stock Incentive Plan ("SI Plan").
Beginning in mid-2021, shares for dividend reinvestment were purchased in the open market instead of being issued by 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").
For information on loan loss experience and nonperforming loans, see “Nonperforming Loans and Repossessed Assets” and “Loan Quality and Allowance for credit losses” herein. Other Income An important source of the Company’s revenue is derived from other income.
For information on credit loss experience and nonperforming loans, see “Nonperforming Loans and Repossessed Assets” and “Loan Quality and Allowance for credit losses” herein. Other Income An important source of the Company’s revenue is derived from other income.
For the Years Ended December 31, 2022, 2021, and 2020 Overview This overview of management’s discussion and analysis highlights selected information in this document and may not contain all the information that is important to you. For a more complete understanding of trends, events, commitments, uncertainties, liquidity, capital resources, and critical accounting estimates, you should carefully read this entire document.
For the Years Ended December 31, 2023, 2022, and 2021 Overview This overview of management’s discussion and analysis highlights selected information in this document and may not contain all the information that is important to you. For a more complete understanding of trends, events, commitments, uncertainties, liquidity, capital resources, and critical accounting estimates, you should carefully read this entire document.
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 loan losses within the agricultural portfolio.
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.
Core deposit intangible assets, with finite lives will be tested for impairment when changes in events or circumstances indicate that its carrying amount may not be recoverable. Core deposit intangible assets were tested for impairment during 2019 as part of the goodwill impairment test and no impairment was deemed necessary.
Core deposit intangible assets, with finite lives will be tested for impairment when changes in events or circumstances indicate that its carrying amount may not be recoverable. Core deposit intangible assets were tested for impairment during 2023 as part of the goodwill impairment test and no impairment was deemed necessary.
The types and maturities of securities purchased are primarily based on the Company’s current and projected liquidity and interest rate sensitivity positions.
The types and maturities of securities purchased are 24 primarily based on the Company’s current and projected liquidity and interest rate sensitivity positions.
Availability of the funds is subject to First Mid Bank meeting minimum regulatory capital requirements for total capital to risk-weighted assets and Tier 1 capital to total average assets. As of December 31, 2022, First Mid Bank met these regulatory requirements. • First Mid Bank can borrow from the Federal Home Loan Bank as a source of liquidity.
Availability of the funds is subject to First Mid Bank meeting minimum regulatory capital requirements for total capital to risk-weighted assets and Tier 1 capital to total average assets. As of December 31, 2023, First Mid Bank met these regulatory requirements. • First Mid Bank can borrow from the Federal Home Loan Bank as a source of liquidity.
The Company attempts to maintain a balance between monetary assets and monetary liabilities, over time, to offset these potential effects. 36
The Company attempts to maintain a balance between monetary assets and monetary liabilities, over time, to offset these potential effects.
The table below presents the credit ratings as of December 31, 2022 for certain investment securities (in thousands): Average Credit Rating of Fair Value at December 31, 2022 (1) Amortized Estimated Not Cost Fair Value AAA AA +/- A +/- BBB +/- Rated Available-for-sale: U.S.
The table below presents the credit ratings as of December 31, 2023 for certain investment securities (in thousands): Average Credit Rating of Fair Value at December 31, 2023 (1) Amortized Estimated Not Cost Fair Value AAA AA +/- A +/- BBB +/- Rated Available-for-sale: U.S.
The following table sets forth the amortized cost of the available-for-sale and held-to-maturity securities for the last three years (dollars in thousands): December 31, 2022 2021 2020 Weighted Weighted Weighted Amortized Average Amortized Average Amortized Average Cost Yield Cost Yield Cost Yield U.S.
The following table sets forth the amortized cost of the available-for-sale and held-to-maturity securities for the last three years (dollars in thousands): December 31, 2023 2022 2021 Weighted Weighted Weighted Amortized Average Amortized Average Amortized Average Cost Yield Cost Yield Cost Yield U.S.
The Company and First Mid Bank have capital ratios above the minimum regulatory capital requirements and, as of December 31, 2022, the Company and First Mid Bank had capital ratios above the levels required for categorization as well-capitalized under the capital adequacy guidelines established by the bank regulatory agencies.
The Company and First Mid Bank have capital ratios above the minimum regulatory capital requirements and, as of December 31, 2023, the Company and First Mid Bank had capital ratios above the levels required for categorization as well-capitalized under the capital adequacy guidelines established by the bank regulatory agencies.
A tabulation of the Company and First Mid Bank's capital ratios as of December 31, 2022 follows: Total Risk- based Capital Ratio Tier One Risk-based Capital Ratio Common Equity Tier 1 Capital Ratio Tier One Leverage Ratio (Capital to Average Assets) First Mid Bancshares, Inc.
A tabulation of the Company and First Mid Bank's capital ratios as of December 31, 2023 follows: Total Risk- based Capital Ratio Tier One Risk-based Capital Ratio Common Equity Tier 1 Capital Ratio Tier One Leverage Ratio (Capital to Average Assets) First Mid Bancshares, Inc.
Capital Ratios For 2022, the minimum regulatory ratios required for minimum capital adequacy purposes plus the capital buffer are 10.5% for the Total Risk-based capital ratio, 8.5% for the Tier 1 Risk-based capital ratio, 7.0% for the Common Equity Tier 1 capital ratio, and 4.0% for the Tier 1 Leverage ratio.
Capital Ratios For 2023, the minimum regulatory ratios required for minimum capital adequacy purposes plus the capital buffer are 10.5% for the Total Risk-based capital ratio, 8.5% for the Tier 1 Risk-based capital ratio, 7.0% for the Common Equity Tier 1 capital ratio, and 4.0% for the Tier 1 Leverage ratio.
Details for these sources include: • First Mid Bank has $100 million available in overnight federal fund lines, including $30 million from First Horizon Bank, $20 million from U.S. Bank, N.A., $10 million from Wells Fargo Bank, N.A., $15 million from The Northern Trust Company and $25 million from Zions Bank.
Details for these sources include: • First Mid Bank has $120 million available in overnight federal fund lines, including $30 million from First Horizon Bank, $20 million from U.S. Bank, N.A., $20 million from BMO Bank, N.A., $10 million from Wells Fargo Bank, N.A., $15 million from The Northern Trust Company and $25 million from Zions Bank.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis are intended to provide a better understanding of the consolidated financial condition and results of operations of the Company and its subsidiaries years ended December 31, 2022, 2021, and 2020.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis are intended to provide a better understanding of the consolidated financial condition and results of operations of the Company and its subsidiaries for the years ended December 31, 2023, 2022, and 2021.
For the years ended December 31, 2022 and 2021, the Company also had $10 million of floating rate trust preferred securities outstanding through Trust II, and in September 2016, the Company acquired $4 million of floating rate trust preferred securities from First Clover Leaf under Clover Leaf Statutory Trust I and on May 1, 2018, the Company acquired $6 million of floating rate trust preferred securities from First BancTrust Corporation.
For the year ended December 31, 2022, the Company had $10 million of floating rate trust preferred securities outstanding through Trust II, and in September 2016, the Company acquired $4 million of floating rate trust preferred securities from First Clover Leaf under Clover Leaf Statutory Trust I and on May 1, 2018, the Company acquired $6 million of floating rate trust preferred securities from First BancTrust Corporation.
(2) Includes demand loans, past due loans and overdrafts. 26 As of December 31, 2022, loans with maturities over one year consisted of approximately $2.9 billion in fixed rate loans and approximately $1.3 billion in variable rate loans. The loan maturities noted above are based on the contractual provisions of the individual loans.
(2) Includes demand loans, past due loans and overdrafts. 26 As of December 31, 2023, loans with maturities over one year consisted of approximately $3.1 billion in fixed rate loans and approximately $1.7 billion in variable rate loans. The loan maturities noted above are based on the contractual provisions of the individual loans.
In 2022 the Company maintained account relationships with various public entities throughout its market areas. These public entities had total balances of $319.4 million and $291.4 million in various checking accounts and time deposits as of December 31, 2022 and 2021, respectively. These balances are subject to change depending upon the cash flow needs of the public entity.
In 2023 the Company maintained account relationships with various public entities throughout its market areas. These public entities had total balances of $381.3 million and $319.4 million in various checking accounts and time deposits as of December 31, 2023 and 2022, respectively. These balances are subject to change depending upon the cash flow needs of the public entity.
At December 31, 2022, the excess collateral at the FHLB would support approximately $582.1 million of additional advances for First Mid Bank. • First Mid Bank is a member of the Federal Reserve System and can borrow funds provided that sufficient collateral is pledged. • In addition, as of December 31, 2022, the Company had a revolving credit agreement in the amount of $15 million with The Northern Trust Company with an outstanding balance of $0 million and $15 million in available funds.
At December 31, 2023, the excess collateral at the FHLB would support approximately $856.2 million of additional advances for First Mid Bank. • First Mid Bank is a member of the Federal Reserve System and can borrow funds provided that sufficient collateral is pledged. • In addition, as of December 31, 2023, the Company had a revolving credit agreement in the amount of $15 million with The Northern Trust Company with an outstanding balance of $0 and $15 million in available funds.
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 (LIBOR plus 160 basis points) after June 15, 2011 (6.37% and 1.80% at December 31, 2022 and 2021, respectively).
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 (LIBOR plus 160 basis points) after June 15, 2011 (7.25% and 6.37% at December 31, 2023 and 2022, respectively).
The $4,000,000 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 2025, bear interest at three-month LIBOR plus 185 basis points (6.47% and 2.05% at December 31, 2022 and 2021, respectively) and resets quarterly.
The $4,000,000 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 2025, bear interest at three-month LIBOR plus 185 basis points (7.50% and 6.47% at December 31, 2023 and 2022, respectively) and resets quarterly.
In addition, the Company has $209.8 million of loans to motels and hotels. The performance of these loans is dependent on borrower specific issues as well as the general level of business and personal travel within the region.
In addition, the Company has $215.4 million of loans to motels and hotels. The performance of these loans is dependent on borrower specific issues as well as the general level of business and personal travel within the region.
The Company established Trust II for the purpose of issuing the trust preferred securities. The $10 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 $10,310,000, was invested in junior subordinated debentures of the Company.
The $10 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 $10,310,000, was invested in junior subordinated debentures of the Company.
The Company’s operations (and therefore its loans) are concentrated in east central Illinois, an area where agriculture is the dominant industry. Accordingly, lending and other business relationships with agriculture-based businesses are critical to the Company’s success. At December 31, 2022, the Company’s loan portfolio included $577.2 million of loans to borrowers whose businesses are directly related to agriculture.
The Company’s operations (and therefore its loans) are concentrated in east central Illinois, an area where agriculture is the dominant industry. Accordingly, lending and other business relationships with agriculture-based businesses are critical to the Company’s success. At December 31, 2023, the Company’s loan portfolio included $588.5 million of loans to borrowers whose businesses are directly related to agriculture.
The $6,000,000 of trust preferred securities and an additional $186,000 additional investment in common equity of FBTCST I is invested in junior subordinated debentures issued to FBTCST I. The subordinated debentures mature in 2035, bear interest at three-month LIBOR plus 170 basis points (6.62% and 1.90% at December 31, 2022 and 2021, respectively) and resets quarterly.
The $6,000,000 of trust preferred securities and an additional $186,000 additional investment in common equity of FBTCST I is invested in junior subordinated debentures issued to FBTCST I. The subordinated debentures mature in 2035, bear interest at three-month LIBOR plus 170 basis points (7.35% and 6.62% at December 31, 2023 and 2022, respectively) and resets quarterly.
The ESPP is intended to qualify as an employee stock purchase plan under Section 423 of the Internal Revenue Code. A maximum of 600,000 shares of common stock may be issued under the ESPP. As of December 31, 2022, 2021, and 2020, 23,055, 11,748, and 11,037 shares, respectively were issued pursuant to ESPP.
The ESPP is intended to qualify as an employee stock purchase plan under Section 423 of the Internal Revenue Code. A maximum of 34 600,000 shares of common stock may be issued under the ESPP. As of December 31, 2023, 2022, and 2021, 38,989, 23,055, and 11,748 shares, respectively were issued pursuant to ESPP.
Year-end total nonperforming loans were $19.2 million at December 31, 2022 compared to $22.0 million at December 31, 2021, and $28.1 million at December 31, 2020. Repossessed Assets balances totaled $4.4 million at December 31, 2022 compared to $5.0 million at December 31, 2021, and $2.5 million at December 31, 2020.
Year-end total nonperforming loans were $20.1 million at December 31, 2023 compared to $19.2 million at December 31, 2022, and $22.0 million at December 31, 2021. Repossessed Assets balances totaled $1.2 million at December 31, 2023 compared to $4.4 million at December 31, 2022, and $5.0 million at December 31, 2021.
These have an impact on the Company’s consolidated financial condition and results of consolidated operations. Net income was $73.0 million, $51.5 million, and $45.3 million and diluted earnings per share were $3.60, $2.87, and $2.70 for the years ended December 31, 2022, 2021, and 2020, respectively.
These have an impact on the Company’s consolidated financial condition and results of consolidated operations. Net income was $68.9 million, $73.0 million, and $51.5 million and diluted earnings per share were $3.15, $3.60, and $2.87 for the years ended December 31, 2023, 2022, and 2021, respectively.
(2) Nonaccrual loans have been included in the average balances. Balances are net of unaccreted discount related to loans acquired. Net interest income on a tax-effected basis increased $17.1 million or 10.0% in 2022 compared to an increase of $40.7 million or 31.4% in 2021.
(2) Nonaccrual loans have been included in the average balances. Balances are net of unaccreted discount related to loans acquired. Net interest income on a tax-effected basis increased $9.1 million or 4.8% in 2023 compared to an increase of $17.1 million or 10.0% in 2022.
The year-to-date net yield on interest-earning assets excluding the TE adjustments of $3,164,000, $2,624,000, and $2,223,000 for 2022, 2021, and 2020, respectively, were 3.08%, 3.17%, and 3.20% at December 31, 2022, 2021, and 2020, respectively.
The year-to-date net yield on interest-earning assets excluding the TE adjustments of $3,060,000, $3,164,000, and $2,624,000 for 2023, 2022, and 2021, respectively, were 3.00%, 3.08%, and 3.17% at December 31, 2023, 2022, and 2021, respectively.
During 2022, 2021, and 2020, the Company awarded 63,150 and 48,575, and 25,950 shares as stock and stock unit awards, respectively. This SI Plan is more fully described in Note 13 - Stock Incentive Plan. Stock Repurchase Program.
During 2023, 2022, and 2021, the Company awarded 45,986 and 63,150, and 48,575 shares as stock and stock unit awards, respectively. This SI Plan is more fully described in Note 13 - Stock Incentive Plan. Stock Repurchase Program.
The three levels are defined as follows: • Level 1 — quoted prices (unadjusted) for identical assets or liabilities in active markets. • Level 2 — inputs include quoted prices for similar assets and liabilities in active markets, quoted prices of identical or similar assets or liabilities in markets that are not active, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. • Level 3 — inputs that are unobservable and significant to the fair value measurement. 20 At the end of each quarter, the Company assesses the valuation hierarchy for each asset or liability measured.
The three levels are defined as follows: • Level 1 — quoted prices (unadjusted) for identical assets or liabilities in active markets. • Level 2 — inputs include quoted prices for similar assets and liabilities in active markets, quoted prices of identical or similar assets or liabilities in markets that are not active, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. • Level 3 — inputs that are unobservable and significant to the fair value measurement.
See Note 9 – “Borrowings” for a more detailed description. Effects of Inflation Unlike industrial companies, virtually all of the assets and liabilities of the Company are monetary in nature. As a result, interest rates have a more significant impact on the Company’s performance than the effects of general levels of inflation.
Effects of Inflation Unlike industrial companies, virtually all of the assets and liabilities of the Company are monetary in nature. As a result, interest rates have a more significant impact on the Company’s performance than the effects of general levels of inflation.
The primary reasons for the more significant year-to-year changes in other expense components are as follows: • Salaries and employee benefits, the largest component of other expense, increased primarily due to an increase in incentive compensation and commission, share-based compensation expense, increases for merit raises and applicable payroll taxes, and the addition of Jefferson Bank, offset by declines in bonus accrual expense and group insurance expense.
The primary reasons for the more significant year-to-year changes in other expense components are as follows: • Salaries and employee benefits, the largest component of other expense, increased primarily due to the acquisition of Blackhawk Bank an increase in incentive compensation and commission, increases for merit raises and applicable payroll taxes, and an increase in employee group insurance expense, partially offset by a decline in bonus accrual expense.
While the Company adheres to sound underwriting standards, a prolonged period of reduced business or personal travel could result in an increase in nonperforming loans to this business segment and potentially in loan losses. The Company also has $956.1 million of loans to lessors of non-residential buildings and $453.2 million of loans to lessors of residential buildings and dwellings.
While the Company adheres to sound underwriting standards, a prolonged period of reduced business or personal travel could result in an increase in nonperforming loans to this business segment and potentially in credit losses. The Company also has $1.09 billion of loans to lessors of non-residential buildings and $541.9 million of loans to lessors of residential buildings and dwellings.
The following table presents information concerning the aggregate amount of nonperforming loans and repossessed assets (in thousands): December 31, 2022 2021 2020 2019 2018 Nonaccrual loans $ 15,956 $ 18,105 $ 23,750 $ 25,118 $ 27,298 Troubled debt restructurings which are performing in accordance with revised terms 3,214 3,931 4,373 2,700 2,451 Total nonperforming loans 19,170 22,036 28,123 27,818 29,749 Repossessed assets 4,369 5,019 2,493 3,720 2,595 Total nonperforming loans and repossessed assets $ 23,539 $ 27,055 $ 30,616 $ 31,538 $ 32,344 Nonperforming loans to loans, before allowance for credit losses 0.40 % 0.55 % 0.90 % 1.03 % 1.12 % Nonperforming loans and repossessed assets to loans, before allowance for credit losses 0.49 % 0.68 % 0.98 % 1.17 % 1.22 % The $2.1 million decrease in nonaccrual loans during 2022 resulted from the net of $5.4 million of loans put on nonaccrual status, offset by $0.4 million of loans transferred to other real estate owned, $0.3 million of loans charged off and $6.8 million of loans becoming current or paid-off.
The following table presents information concerning the aggregate amount of nonperforming loans and repossessed assets (in thousands): December 31, 2023 2022 2021 2020 2019 Nonaccrual loans $ 18,832 $ 15,956 $ 18,105 $ 23,750 $ 25,118 Troubled debt restructurings which are performing in accordance with revised terms 1,296 3,214 3,931 4,373 2,700 Total nonperforming loans 20,128 19,170 22,036 28,123 27,818 Repossessed assets 1,164 4,369 5,019 2,493 3,720 Total nonperforming loans and repossessed assets $ 21,292 $ 23,539 $ 27,055 $ 30,616 $ 31,538 Nonperforming loans to loans, before allowance for credit losses 0.36 % 0.40 % 0.55 % 0.90 % 1.03 % Nonperforming loans and repossessed assets to loans, before allowance for credit losses 0.38 % 0.49 % 0.68 % 0.98 % 1.17 % The $2.9 million increase in nonaccrual loans during 2023 resulted from the net of $18.9 million of loans put on nonaccrual status, offset by $0.7 million of loans transferred to other real estate owned, $0.2 million of loans charged off and $15.1 million of loans becoming current or paid-off.
During 2021, the Company repurchased 7,752 (0.05% of common shares) at a total price of approximately $326,000. All of these shares were a result of shares withheld for taxes on vested employee stock incentives. As of December 31, 2022, approximately $4.1 million remains available for purchase under the repurchase programs. Treasury stock is further affected by activity in the DCP.
During 2022, the Company repurchased 10,647 (0.05% of common shares) at a total price of approximately $341,000. All of these shares were a result of shares withheld for taxes on vested employee stock incentives. As of December 31, 2023, approximately $3.6 million remains available for purchase under the repurchase programs. Treasury stock is further affected by activity in the DCP.
Of the $17,830,000 in common stock dividends paid during 2022, $0 or 0.0% was reinvested into shares of common stock of the Company through the DRIP. Approximately $0, $333,000 and $680,000 of common stock was issued through reinvestment of dividends during 2022, 2021, and 2020, respectively.
Of the $19,557,000 in common stock dividends paid during 2023, $0 or 0.0% was reinvested into shares of common stock of the Company through the DRIP. Approximately $0, $0 and $333,000 of common stock was issued through reinvestment of dividends during 2023, 2022, and 2021, respectively.
During 2022, there were significant charge-offs of two commercial real estate loans to one borrower of $271,000 and significant charge-offs of two commercial operating loans to two borrowers of $739,000.
During 2023, there were significant charge-offs of one ag operating loan to one borrower of $181,000 and significant charge-off of one commercial operating loan to one borrower of $353,000. During 2022, there were significant charge-offs of two commercial real estate loans to one borrower of $271,000 and significant charge-offs of two commercial operating loans to two borrowers of $739,000.
The increase in this ratio is primarily due to a decline in nonperforming loans. Management believes that the overall estimate of the allowance for credit losses appropriately accounts for probable losses attributable to current exposures. During 2022, the Company had net charge-offs of $1,231,000 compared to $4,480,000 in 2021.
The increase in this ratio is primarily due to an increase in the allowance. Management believes that the overall estimate of the allowance for credit losses appropriately accounts for probable losses attributable to current exposures. During 2023, the Company had net charge-offs of $313,000 compared to $1,231,000 in 2022.
Analysis of the allowance for credit losses for the past five years and of changes in the allowance for these periods is summarized as follows (dollars in thousands): 2022 2021 2020 2019 2018 Average loans outstanding, net of unearned income $ 4,518,566 $ 3,778,142 $ 3,003,488 $ 2,598,718 $ 2,276,500 Adjustment for adoption of ASU 2016-13 — — 1,672 — — Allowance-beginning of period 54,655 41,910 28,583 26,189 19,977 Initial allowance on loans purchased with credit deterioration 863 2,074 — — — Charge-offs: Construction and land development 2 205 13 — 10 Agricultural real estate — — — — — 1-4 family residential properties 191 371 393 1,477 1,111 Commercial real estate 414 535 830 1,743 170 Agricultural loans 93 — — 24 93 Commercial and industrial loans 870 3,118 1,991 1,828 832 Consumer loans 1,380 1,405 617 1,254 777 Total charge-offs 2,950 5,634 3,844 6,326 2,993 Recoveries: Construction and land development 100 — — — — Agricultural real estate — — — — — 1-4 family residential properties 359 211 299 91 102 Commercial real estate 385 60 169 12 — Agricultural loans 54 1 — — — Commercial and industrial loans 208 139 179 155 145 Consumer loans 613 743 421 357 291 Total recoveries 1,719 1,154 1,068 615 538 Net charge-offs 1,231 4,480 2,776 5,711 2,455 Provision for loan losses 4,806 15,151 16,103 6,433 8,667 Allowance-end of period $ 59,093 $ 54,655 $ 41,910 $ 26,911 $ 26,189 Ratio of annualized net charge-offs to average loans 0.03 % 0.12 % 0.09 % 0.22 % 0.11 % Ratio of allowance for credit losses to loans outstanding (less unearned interest at end of period) 1.22 % 1.37 % 1.34 % 1.00 % 0.99 % Ratio of allowance for credit losses to nonperforming loans 308.3 % 248.0 % 149.0 % 96.7 % 88.0 % The ratio of the allowance for credit losses to nonperforming loans was 308.3% as of December 31, 2022 compared to 248.0% as of December 31, 2021.
Analysis of the allowance for credit losses for the past five years and of changes in the allowance for these periods is summarized as follows (dollars in thousands): 2023 2022 2021 2020 2019 Average loans outstanding, net of unearned income $ 5,079,949 $ 4,518,566 $ 3,778,142 $ 3,003,488 $ 2,598,718 Adjustment for adoption of ASU 2016-13 — — — 1,672 — Allowance-beginning of period 59,093 54,655 41,910 28,583 26,189 Initial allowance on loans purchased with credit deterioration 3,791 863 2,074 — — Charge-offs: Construction and land development 14 2 205 13 — 1-4 family residential properties 87 191 371 393 1,477 Commercial real estate 25 414 535 830 1,743 Agricultural loans 408 93 — — 24 Commercial and industrial loans 529 870 3,118 1,991 1,828 Consumer loans 1,568 1,380 1,405 617 1,254 Total charge-offs 2,631 2,950 5,634 3,844 6,326 Recoveries: Construction and land development — 100 — — — 1-4 family residential properties 216 359 211 299 91 Commercial real estate 805 385 60 169 12 Agricultural loans 38 54 1 — — Commercial and industrial loans 576 208 139 179 155 Consumer loans 683 613 743 421 357 Total recoveries 2,318 1,719 1,154 1,068 615 Net charge-offs 313 1,231 4,480 2,776 5,711 Provision for credit losses 6,104 4,806 15,151 16,103 6,433 Allowance-end of period $ 68,675 $ 59,093 $ 54,655 $ 41,910 $ 26,911 Ratio of annualized net charge-offs to average loans 0.01 % 0.03 % 0.12 % 0.09 % 0.22 % Ratio of allowance for credit losses to loans outstanding (less unearned interest at end of period) 1.23 % 1.22 % 1.37 % 1.34 % 1.00 % Ratio of allowance for credit losses to nonperforming loans 341.2 % 308.3 % 248.0 % 149.0 % 96.7 % The ratio of the allowance for credit losses to nonperforming loans was 341.2% as of December 31, 2023 compared to 308.3% as of December 31, 2022.
The following table summarizes the composition of the loan portfolio, including loans held for sale, for the last five years (dollars in thousands): % Outstanding 2022 Loans 2021 2020 2019 2018 Construction and land development $ 144,264 3.0 % $ 145,118 $ 122,479 $ 94,142 $ 50,619 Agricultural real estate 410,327 8.5 % 279,272 254,341 240,241 231,700 1-4 family residential properties 440,180 9.1 % 400,313 325,762 336,427 373,518 Multifamily residential properties 294,346 6.1 % 298,942 189,632 153,948 184,051 Commercial real estate 2,030,011 42.1 % 1,666,198 1,174,300 995,702 906,850 Loans secured by real estate 3,319,128 68.8 % 2,789,843 2,066,514 1,820,460 1,746,738 Agricultural loans 166,838 3.5 % 151,484 137,352 136,124 135,877 Commercial and industrial loans 1,082,960 22.4 % 832,008 738,313 528,973 557,011 Consumer loans 97,775 2.0 % 78,442 78,002 83,183 91,516 All other loans 159,511 3.3 % 143,746 118,238 126,607 113,377 Total loans $ 4,826,212 100.0 % $ 3,995,523 $ 3,138,419 $ 2,695,347 $ 2,644,519 Loan balances increased by $830.7 million or 20.8% from December 31, 2021 to December 31, 2022 which included approximately $418.5 million of loans acquired, before purchase accounting adjustments, from Jefferson Bank.
The following table summarizes the composition of the loan portfolio, including loans held for sale, for the last five years (dollars in thousands): Outstanding 2023 Loans 2022 2021 2020 2019 Construction and land development $ 205,077 3.7 % $ 144,264 $ 145,118 $ 122,479 $ 94,142 Agricultural real estate 391,132 7.0 % 410,327 279,272 254,341 240,241 1-4 family residential properties 542,469 9.7 % 440,180 400,313 325,762 336,427 Multifamily residential properties 319,129 5.7 % 294,346 298,942 189,632 153,948 Commercial real estate 2,384,704 42.8 % 2,030,011 1,666,198 1,174,300 995,702 Loans secured by real estate 3,842,511 68.9 % 3,319,128 2,789,843 2,066,514 1,820,460 Agricultural loans 196,272 3.5 % 166,838 151,484 137,352 136,124 Commercial and industrial loans 1,266,159 22.7 % 1,082,960 832,008 738,313 528,973 Consumer loans 91,014 1.6 % 97,775 78,442 78,002 83,183 All other loans 184,609 3.3 % 159,511 143,746 118,238 126,607 Total loans $ 5,580,565 100.0 % $ 4,826,212 $ 3,995,523 $ 3,138,419 $ 2,695,347 Loan balances increased by $754.4 million or 15.6% from December 31, 2022 to December 31, 2023 which included approximately $730.2 million of gross loans acquired, after purchase accounting adjustments, from Blackhawk Bank.
Total deposit balances increased to $5.26 billion at December 31, 2022 from $4.96 billion at December 31, 2021 and from $3.69 billion at December 31, 2020. The increase in 2022 was primarily due to $560 million of deposits acquired from Jefferson Bank.
Total deposit balances increased to $6.12 billion at December 31, 2023 from $5.26 billion at December 31, 2022 and from $4.96 billion at December 31, 2021. The increase in 2023 was primarily due to $1.19 billion acquired from Blackhawk Bank. The increase in 2022 was primarily due to $560 million of deposits acquired from Jefferson Bank.
Since August 5, 1998, the Board of Directors has approved repurchase programs pursuant to which the Company may repurchase a total of approximately $76.7 million of the Company’s common stock. During 2022, the Company repurchased 10,647 shares (0.05% of common shares) at a total price of approximately $341,000.
Since August 5, 1998, the Board of Directors has approved repurchase programs pursuant to which the Company may repurchase a total of approximately $76.7 million of the Company’s common stock. During 2023, the Company repurchased 13,481 shares (0.06% of common shares) at a total price of approximately $465,000.
The allowance is allocated to the individual loan categories by a specific allocation for all classified loans plus a percentage of loans not classified based on historical losses and other factors. 29 The allowance for credit losses, in management's judgment, was allocated as follows to cover probable loan losses (dollars in thousands): December 31, 2022 December 31, 2021 December 31, 2020 % of loans to % of loans to % of loans to Allowance for credit losses total loans Allowance for credit losses total loans Allowance for credit losses total loans Construction and land development $ 2,250 3.0 % $ 1,743 3.6 % $ 1,666 3.9 % Agriculture real estate 1,433 8.5 % 1,257 7.0 % 1,084 8.1 % 1-4 family residential 3,742 9.1 % 2,330 10.0 % 2,322 10.4 % Commercial real estate 28,157 48.2 % 26,246 49.2 % 19,660 43.4 % Agricultural loans 585 3.5 % 983 3.8 % 1,526 4.4 % Commercial and industrial 20,808 25.7 % 19,241 24.4 % 13,485 27.3 % Consumer 2,118 2.0 % 2,855 2.0 % 2,167 2.5 % Total allocated 59,093 100.0 % 54,655 100.0 % 41,910 100.0 % Unallocated — NA — NA — NA Allowance at end of year $ 59,093 100.0 % $ 54,655 100.0 % $ 41,910 100.0 % December 31, 2019 December 31, 2018 % of loans to % of loans to Allowance for credit losses total loans Allowance for credit losses total loans Construction and land development $ 1,146 3.5 % $ 561 1.9 % Agriculture real estate 1,093 8.9 % 1,246 8.8 % 1-4 family residential 1,386 12.5 % 1,504 14.1 % Commercial real estate 11,198 42.6 % 11,102 41.3 % Agricultural loans 1,386 5.1 % 951 5.1 % Commercial and industrial 9,273 24.3 % 9,893 25.3 % Consumer 1,429 3.1 % 932 3.5 % Total allocated 26,911 100.0 % 26,189 100.0 % Unallocated — NA — NA Allowance at end of year $ 26,911 100.0 % $ 26,189 100.0 % Deposits Funding of the Company’s earning assets is substantially provided by a combination of consumer, commercial and public fund deposits.
The allowance for credit losses, in management's judgment, was allocated as follows to cover probable credit losses (dollars in thousands): December 31, 2023 December 31, 2022 December 31, 2021 % of loans to % of loans to % of loans to Allowance for credit losses total loans Allowance for credit losses total loans Allowance for credit losses total loans Construction and land development $ 2,918 3.7 % $ 2,250 3.0 % $ 1,743 3.6 % Agriculture real estate 1,366 7.0 % 1,433 8.5 % 1,257 7.0 % 1-4 family residential 4,220 9.7 % 3,742 9.1 % 2,330 10.0 % Commercial real estate 31,758 48.5 % 28,157 48.2 % 26,246 49.2 % Agricultural loans 705 3.5 % 585 3.5 % 983 3.8 % Commercial and industrial 25,450 26.0 % 20,808 25.7 % 19,241 24.4 % Consumer 2,258 1.6 % 2,118 2.0 % 2,855 2.0 % Total allocated 68,675 100.0 % 59,093 100.0 % 54,655 100.0 % Allowance at end of year $ 68,675 100.0 % $ 59,093 100.0 % $ 54,655 100.0 % 29 December 31, 2020 December 31, 2019 % of loans to % of loans to Allowance for credit losses total loans Allowance for credit losses total loans Construction and land development $ 1,666 3.9 % $ 1,146 3.5 % Agriculture real estate 1,084 8.1 % 1,093 8.9 % 1-4 family residential 2,322 10.4 % 1,386 12.5 % Commercial real estate 19,660 43.4 % 11,198 42.6 % Agricultural loans 1,526 4.4 % 1,386 5.1 % Commercial and industrial 13,485 27.3 % 9,273 24.3 % Consumer 2,167 2.5 % 1,429 3.1 % Total allocated 41,910 100.0 % 26,911 100.0 % Allowance at end of year $ 41,910 100.0 % $ 26,911 100.0 % Deposits Funding of the Company’s earning assets is substantially provided by a combination of consumer, commercial and public fund deposits.
There were 1,043 full-time equivalent employees at December 31, 2022, compared to 965 at December 31, 2021, and 824 at December 31, 2020. • Occupancy and equipment expense increased primarily due to increases in depreciation, equipment and other property related expenses from the acquisition of Jefferson Bank, offset by decreases in data processing expense.
There were 1,187 full-time equivalent employees at December 31, 2023, compared to 1,043 at December 31, 2022, and 965 at December 31, 2021. • Occupancy and equipment expense increased primarily due to increases in depreciation, equipment and other property related expenses from the acquisition of Blackhawk Bank.
At December 31, 2021 FHLB advances totaled $86 million with a weighted-average interest rate of 1.66% and maturities from March 2022 to December 2029. The Company is party to a revolving credit agreement with The Northern Trust Company in the amount of $15 million. The balance on this line of credit was $0 as of December 31, 2022.
At December 31, 2022 FHLB advances totaled $465 million with a weighted-average interest rate of 3.48% and maturities from January 2023 to December 2032. The Company is party to a revolving credit agreement with The Northern Trust Company in the amount of $15 million. The balance on this line of credit was $0 as of December 31, 2023.
The balance of real estate loans held for sale, included in the balances shown above, amounted to $338,000 and $2,748,000 as of December 31, 2022 and 2021, respectively. Commercial and commercial real estate loans generally involve higher credit risks than residential real estate and consumer loans.
The balance of real estate loans held for sale, included in the balances shown above, amounted to $5.0 million and $0.3 million as of December 31, 2023 and 2022, respectively. Commercial and commercial real estate loans generally involve higher credit risks than residential real estate and consumer loans.
FHLB advances represent borrowings by the First Mid Bank to economically fund loan demand. At December 31, 2022 FHLB advances totaled $465 million with a weighted-average interest rate of 3.48% and maturities from January 2023 to December 2032.
FHLB advances represent borrowings by the First Mid Bank to economically fund loan demand. At December 31, 2023 FHLB advances totaled $264 million with a weighted-average interest rate of 3.58% and maturities from May 2024 to December 2029.
The following table shows the Company’s annualized performance ratios for the years ended December 31, 2022, 2021, and 2020: 2022 2021 2020 Return on average assets 1.11 % 0.90 % 1.05 % Return on average common equity 11.38 % 8.38 % 8.24 % Average common equity to average assets 9.77 % 10.72 % 12.76 % Total assets at December 31, 2022, 2021, and 2020 were $6.74 billion, $5.99 billion, and $4.73 billion, respectively.
The following table shows the Company’s annualized performance ratios for the years ended December 31, 2023, 2022, and 2021: 2023 2022 2021 Return on average assets 0.97 % 1.11 % 0.90 % Return on average common equity 10.10 % 11.38 % 8.38 % Average common equity to average assets (non-GAAP) 9.61 % 9.77 % 10.72 % Total assets at December 31, 2023, 2022, and 2021 were $7.59 billion, $6.74 billion, and $5.99 billion, respectively.
The following table summarizes the composition of repossessed assets (dollars in thousands): December 31, 2022 December 31, 2021 Balance % of Total Balance % of Total Construction and land development $ 2,763 63.2 % $ 3,004 59.9 % 1-4 family residential properties 108 2.5 % 12 0.2 % Commercial real estate 1,390 31.8 % 1,968 39.2 % Total real estate 4,261 97.5 % 4,984 99.3 % Consumer loans 108 2.5 % 35 0.7 % Total repossessed collateral $ 4,369 100.0 % $ 5,019 100.0 % Repossessed assets sold during 2022 resulted in net gains of $36,000 related to real estate asset sales and $2,000 of net losses related to other assets sales.
The following table summarizes the composition of repossessed assets (dollars in thousands): December 31, 2023 December 31, 2022 Balance % of Total Balance % of Total Construction and land development $ 1,130 97.1 % $ 2,763 63.2 % 1-4 family residential properties 33 2.8 % 108 2.5 % Commercial real estate — — 1,390 31.8 % Total real estate 1,163 99.9 % 4,261 97.5 % Consumer loans 1 0.1 % 108 2.5 % Total repossessed collateral $ 1,164 100.0 % $ 4,369 100.0 % Repossessed assets sold during 2023 resulted in net gains of $148,000 related to real estate asset sales and $21,000 of net losses related to other assets sales.
The increase was primarily due to time deposits acquired from Jefferson Bank. The balance of time deposits of $100,000 or more increased $19.4 million from December 31, 2020 to December 31, 2021. The increase in 2021 was primarily due to time deposits acquired from Providence Bank.
The increase was primarily due to time deposits acquired from Blackhawk Bank. The balance of time deposits of $100,000 or more increased $120.9 million from December 31, 2021 to December 31, 2022. The increase in 2022 was primarily due to time deposits acquired from Jefferson Bank.
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.
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.
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).
New issuances of trust preferred securities, however, would not count as Tier 1 regulatory capital. 32 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).
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.
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. 31 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.
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 increase in 2022 was primarily due to the acquisition of Jefferson Bank. 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.
Loans sold balances were as follows: • $62.3 million (representing 422 loans) in 2022 • $149.0 million (representing 1,011 loans) in 2021 • $196.0 million (representing 1,315 loans) in 2020 First Mid Bank generally releases the servicing rights on loans sold into the secondary market. • Revenue from ATMs and debit cards increased in 2022 primarily due to the acquisition of Jefferson Bank and in 2021 primarily due to the acquisition of Providence Bank. • Bank owned life insurance increased during 2022 due to $15.8 million of bank owned life insurance added through the acquisition of Jefferson Bank.
Loans sold balances were as follows: • $57.5 million (representing 413 loans) in 2023 • $62.3 million (representing 422 loans) in 2022 • $149.0 million (representing 1,011 loans) in 2021 First Mid Bank generally releases the servicing rights on loans sold into the secondary market. • Revenue from ATMs and debit cards increased in 2023 primarily due to the acquisition of Blackhawk Bank and in 2022 primarily due to the acquisition of Jefferson Bank. • Bank owned life insurance increased during 2023 due to the addition of Blackhawk Bank and higher interest rates.
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.
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.
Net interest income on a tax-effected basis increased primarily due to the growth in average earnings assets including loans and interest-bearing deposits. The tax-effected net interest margin decreased primarily due to higher interest-bearing liability costs. In 2022, average earning assets increased by $690.9 million, or 13.1%, and average interest-bearing liabilities increased by $618.5 million or 15.9%.
Net interest income on a tax-effected basis increased primarily due to the growth in average earnings assets including loans and interest-bearing deposits. The tax-effected net interest margin decreased primarily due to higher interest-bearing liability costs. In 2023, average earning assets increased by $449.1 million, or 7.5%, and average interest-bearing liabilities increased by $539.4 million or 12.0%.
(Consolidated) 15.20 % 12.40 % 12.03 % 9.68 % First Mid Bank 14.18 % 13.17 % 13.17 % 10.22 % Liquidity Liquidity represents the ability of the Company and its subsidiaries to meet all present and future financial obligations arising in the daily operations of the business.
(Consolidated) 14.84 % 12.02 % 11.62 % 9.33 % First Mid Bank 14.22 % 13.17 % 13.17 % 10.23 % Liquidity Liquidity represents the ability of the Company and its subsidiaries to meet all present and future financial obligations arising in the daily operations of the business.
The increase in 2021 was primarily due to the acquisition of Providence Bank. • Net securities gains in 2022 were $33,000 compared to $124,000 in 2021 and $1,106,000 in 2020.
The increase in 2022 was primarily due to the acquisition of Jefferson Bank. • Net securities gains in 2023 were $3,383,000 compared to $33,000 in 2022 and $124,000 in 2021.
Provision for Loan Losses The provision for loan losses in 2022 was $4.8 million compared to $15.2 million in 2021 and $16.1 million in 2020. Nonperforming loans decreased to $19.2 million at December 31, 2022 from $22.0 million at December 31, 2021 and $28.1 million at December 31, 2020.
Provision for Credit Losses The provision for credit losses in 2023 was $6.1 million compared to $4.8 million in 2022 and $15.2 million in 2021. Nonperforming loans increased to $20.1 million at December 31, 2023 from $19.2 million at December 31, 2022 and $22.0 million at December 31, 2021.
The following table summarizes the composition of nonaccrual loans (dollars in thousands): December 31, 2022 December 31, 2021 Balance % of Total Balance % of Total Construction and land development $ 14 0.1 % $ 25 0.1 % Agricultural real estate 1,258 7.9 % 336 1.9 % 1-4 family residential properties 4,943 31.0 % 5,252 29.0 % Multifamily residential properties 672 4.2 % 1,982 11.0 % Commercial real estate 7,640 47.8 % 7,920 43.7 % Loans secured by real estate 14,527 91.0 % 15,515 85.7 % Agricultural loans 57 0.4 % 560 3.1 % Commercial and industrial loans 1,098 6.9 % 1,851 10.2 % Consumer loans 274 1.7 % 179 1.0 % Total loans $ 15,956 100.0 % $ 18,105 100.0 % 27 Interest income that would have been reported if nonaccrual and restructured loans had been performing totaled $103,000, $308,000 and $575,000 for the years ended December 31, 2022, 2021, and 2020, respectively.
The following table summarizes the composition of nonaccrual loans (dollars in thousands): December 31, 2023 December 31, 2022 Balance % of Total Balance % of Total Construction and land development $ — — % $ 14 0.1 % Agricultural real estate 1,146 6.1 % 1,258 7.9 % 1-4 family residential properties 4,940 26.2 % 4,943 31.0 % Multifamily residential properties — — % 672 4.2 % Commercial real estate 10,237 54.3 % 7,640 47.8 % Loans secured by real estate 16,323 86.6 % 14,527 91.0 % Agricultural loans — — % 57 0.4 % Commercial and industrial loans 1,931 10.3 % 1,098 6.9 % Consumer loans 578 3.1 % 274 1.7 % Total loans $ 18,832 100.0 % $ 15,956 100.0 % 27 Interest income that would have been reported if nonaccrual and restructured loans had been performing totaled $412,000, $103,000 and $308,000 for the years ended December 31, 2023, 2022, and 2021, respectively.
At December 31, 2022, the Company classified the cost basis of its common stock issued and held in trust in connection with the DCP of approximately $4,799,000 as treasury stock. The Company also classified the cost basis of its related deferred compensation obligation of approximately $4,799,000 as an equity instrument (deferred compensation). The DCP was effective as of June 1984.
At December 31, 2023, the Company classified the cost basis of its common stock issued and held in trust in connection with the DCP of approximately $5.2 million as treasury stock. The Company also classified the cost basis of its related deferred compensation obligation of approximately $5.2 million as an equity instrument (deferred compensation).
The Company and its subsidiary banks were in compliance with the existing covenants at December 31, 2022 and 2021. 35 Management continues to monitor its expected liquidity requirements carefully, focusing primarily on cash flows from: • lending activities, including loan commitments, letters of credit and mortgage prepayment assumptions; • deposit activities, including seasonal demand of private and public funds; • investing activities, including prepayments of mortgage-backed securities and call provisions on U.S.
Management continues to monitor its expected liquidity requirements carefully, focusing primarily on cash flows from: • lending activities, including loan commitments, letters of credit and mortgage prepayment assumptions; • deposit activities, including seasonal demand of private and public funds; • investing activities, including prepayments of mortgage-backed securities and call provisions on U.S.
These increases were primarily due to assets and liabilities acquired from Jefferson Bank. Changes in average balances are shown below: • Average interest-bearing cash deposits held by the Company decreased $212.0 million or 79.0% in 2022 compared to 2021.
These increases were primarily due to assets and liabilities acquired from Blackhawk Bank. Changes in average balances are shown below: • Average interest-bearing cash deposits held by the Company increased $26.1 million or 46.2% in 2023 compared to 2022.
The increase in 2021 was primarily due to additional properties added in the acquisition of Providence Bank and increases in expense for software and data processing. • Net other real estate owned expense decreased in 2022 primarily due to more properties sold at a net gain compared to properties sold at a net loss or written down during 2021.
The increase in 2022 was primarily due to additional properties added in the acquisition of Jefferson Bank and increases in expense for software and data processing. • Net other real estate owned expense increased in 2023 primarily due to properties sold or written down during the period.
Total assets under management were $5.3 billion at December 31, 2022 compared to $5.1 billion at December 31, 2021 and $4.5 billion at December 31, 2020. • Insurance commissions increased in 2022 primarily due to an increase in commission and contingency income.
Total assets under management were $6.1 billion at December 31, 2023 compared to $5.3 billion at December 31, 2022 and $5.1 billion at December 31, 2021. • Insurance commissions increased in 2023 primarily due to higher commission and contingency income and the acquisition of PGIB Insurance.
The increase in 2021 was primarily due to approximately $829 million of loans acquired from Providence Bank and $208 million of loans purchased from Stifel Bank. Of the increase in 2020, approximately $183 million was loans purchased from Stifel Bank and $168 million was PPP loans.
The increase in 2022 was primarily due to approximately $418.5 17 million of loans acquired from Jefferson Bank. The increase in 2021 was primarily due to approximately $829 million of loans acquired from Providence Bank and $208 million of loans purchased from Stifel Bank.
The increase in 2020 was primarily due to increases in wealth management revenues, insurance commissions and mortgage banking income. Non-interest expenses increased to $162.9 million in 2022 compared to $155.6 million in 2021, and $111.1 million in 2020. The increase in 2022 was primarily due to the acquisition of Jefferson Bank.
The increase in 2022 was primarily due to growth in wealth management and insurance revenues and the acquisition of Jefferson Bank. Non-interest expenses increased to $185.7 million in 2023 compared to $162.9 million in 2022, and $155.6 million in 2021.
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.
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 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.
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.
At December 31, 2022, the recorded balance of the subordinated notes was $94,553,000. 32 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.
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeManagement’s Discussion and Analysis of Financial Condition and Results of Operations – Interest Rate Sensitivity.” Based on the financial analysis performed as of December 31, 2022, which considers how the specific interest rate scenario would be expected to impact each interest-earning asset and each interest-bearing liability, the Company estimates that changes in the prime interest rate would impact First Mid Bank's performance, on a consolidated basis, as follows: Increase (Decrease) In December 31, 2022 Net Interest Income Return On Average Equity ($000) (%) 2022=11.38% Prime rate is 7.50% Prime rate increase of: 200 basis points to 9.50% $ (331 ) (0.21 )% (0.05 )% 100 basis points to 8.50% 36 0.02 % 0.01 % Prime rate decrease of: 100 basis points to 6.50% 1,863 1.17 % 0.26 % 200 basis points to 5.50% 2,044 1.29 % 0.28 % The following table shows the same analysis for First Mid Bank performance as of December 31, 2021: Increase (Decrease) In December 31, 2021 Net Interest Income Return On Average Equity ($000) (%) 2021=8.38% Prime rate is 3.25% Prime rate increase of: 200 basis points to 5.25% $ 4,318 3.07 % 0.64 % 100 basis points to 4.25% 2,136 1.52 % 0.32 % Prime rate decrease of: 100 basis points to 2.25% (3,733 ) (2.65 )% (0.56 )% 200 basis points to 1.25% (8,798 ) (6.25 )% (1.33 )% The Company's Board of Directors has adopted an interest rate risk policy that establishes maximum decreases in the percentage change in net interest income of 5% in a 100 basis point rate shift and 10% in a 200 basis point rate shift.
Biggest changeManagement’s Discussion and Analysis of Financial Condition and Results of Operations – Interest Rate Sensitivity.” Based on the financial analysis performed as of December 31, 2023, which considers how the specific interest rate scenario would be expected to impact each interest-earning asset and each interest-bearing liability, the Company estimates that changes in the prime interest rate would impact First Mid Bank's performance, on a consolidated basis, as follows: Increase (Decrease) In December 31, 2023 Net Interest Income Return On Average Equity ($000) (%) 2023=10.10% Prime rate is 8.50% Prime rate increase of: 200 basis points to 10.50% $ (4,473 ) (2.32 )% (0.59 )% 100 basis points to 9.50% (1,640 ) (0.85 )% (0.22 )% Prime rate decrease of: 100 basis points to 7.50% 1,781 0.92 % 0.23 % 200 basis points to 6.50% 1,366 0.71 % 0.18 % The following table shows the same analysis for First Mid Bank performance as of December 31, 2022: Increase (Decrease) In December 31, 2022 Net Interest Income Return On Average Equity ($000) (%) 2022=11.38% Prime rate is 7.50% Prime rate increase of: 200 basis points to 9.50% $ (331 ) (0.21 )% (0.05 )% 100 basis points to 8.50% 36 0.02 % 0.01 % Prime rate decrease of: 100 basis points to 6.50% 1,863 1.17 % 0.26 % 200 basis points to 5.50% 2,044 1.29 % 0.28 % The Company's Board of Directors has adopted an interest rate risk policy that establishes maximum decreases in the percentage change in net interest income of 5% in a 100 basis point rate shift and 10% in a 200 basis point rate shift.
The results above are based on one-time “shock” moves and ramped rate increases and do not take into account any management response or mitigating action. Interest rate sensitivity analysis is also used to measure the Company’s interest risk by computing estimated changes in the Economic Value of Equity (“EVE”) of the First Mid Bank under various interest rate shocks.
The results above are based on one-time “shock” moves and ramped rate increases and do not take into account any management response or mitigating action. 36 Interest rate sensitivity analysis is also used to measure the Company’s interest risk by computing estimated changes in the Economic Value of Equity (“EVE”) of the First Mid Bank under various interest rate shocks.
The following table presents the Company's projected change in EVE, on a consolidated basis, for the various rate shock levels at December 31, 2022 and 2021 (in thousands). All market risk sensitive instruments presented in the tables are held-to-maturity or available-for-sale. The Bank has no trading securities.
The following table presents the Company's projected change in EVE, on a consolidated basis, for the various rate shock levels at December 31, 2023 and 2022 (in thousands). All market risk sensitive instruments presented in the tables are held-to-maturity or available-for-sale. The Bank has no trading securities.
Further, in the event of a change in interest rates, prepayment and early withdrawal levels would likely deviate significantly from those assumed in the table. Finally, the ability of many borrowers to repay their adjustable-rate debt may decrease in the event of an interest rate increase. 38
Further, in the event of a change in interest rates, prepayment and early withdrawal levels would likely deviate significantly from those assumed in the table. Finally, the ability of many borrowers to repay their adjustable-rate debt may decrease in the event of an interest rate increase. 37
At December 31, 2022, the estimated changes in EVE were inside the Company’s policy guidelines that normally allow for a change in capital of +/-10% from the base case scenario under a 100 basis point shock and within the guidelines of +/- 20% from the base case scenario under a 200 basis point shock.
At December 31, 2023, the estimated changes in EVE were inside the Company’s policy guidelines that normally allow for a change in capital of +/-10% from the base case scenario under a 100 basis point shock and within the guidelines of +/- 20% from the base case scenario under a 200 basis point shock.
Changes In Economic Value of Equity Interest Rates (basis points) Amount of Change ($000) Percent of Change (%) December 31, 2022 +200 bp $ (30,992 ) (3.0 )% +100 bp (13,333 ) (1.3 )% -200 bp 16,153 1.6 % -100 bp 17,371 1.7 % December 31, 2021 +200 bp $ 11,491 1.5 % +100 bp 10,830 1.4 % -200 bp (231,797 ) (29.6 )% -100 bp (96,739 ) 12.3 % 37 As indicated above, at December 31, 2022, in the event of a sudden and sustained increase in prevailing market interest rates, the EVE would be expected to decrease if rates increased 100 or 200 basis points.
Changes In Economic Value of Equity Interest Rates (basis points) Amount of Change ($000) Percent of Change (%) December 31, 2023 +200 bp $ (75,500 ) (6.6 )% +100 bp (28,249 ) (2.5 )% -200 bp 11,597 1.0 % -100 bp 21,499 1.9 % December 31, 2022 +200 bp $ (30,992 ) (3.0 )% +100 bp (13,333 ) (1.3 )% -200 bp 16,153 1.6 % -100 bp 17,371 1.7 % As indicated above, at December 31, 2023, in the event of a sudden and sustained increase in prevailing market interest rates, the EVE would be expected to decrease if rates increased 100 or 200 basis points.

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