First Mid Bancshares, Inc. Announces Fourth Quarter 2022 Results

MATTOON, Ill., Jan. 26, 2023 (GLOBE NEWSWIRE) -- First Mid Bancshares, Inc. (NASDAQ: FMBH) (the “Company”) today announced its financial results for the quarter and year ended December 31, 2022.

Highlights

• Net income of $20.6 million, or $1.01 diluted EPS
• Adjusted net income (non-GAAP) of $20.8 million, or $1.01 diluted EPS
• Strong loan growth of 2.2% for the quarter and 10.3% for the year (excluding acquired loans)
• Tangible book value per share increased 7.8% for the quarter
• Improved on already strong asset quality ratios reflecting strength if economic downturn transpires
• Board of Directors declares regular quarterly dividend of $0.23 per share

“Our fourth quarter results capped off a strong, but challenging year,” said Joe Dively, Chairman and Chief Executive Officer. “For 2022, we delivered exceptional loan growth and excellent credit quality. Our noninterest income grew by over 7% for the year, driven by double digit growth in our wealth management and insurance businesses that more than offset lower mortgage banking revenues. We successfully integrated Jefferson Bank and Trust (“Jefferson”) and met all of our acquisition related financial targets. While funding costs have increased at a faster pace than we anticipated placing pressure on margin, we have offset this challenge with stringent expense management and our relationship driven strategy to provide our expanded services to customers.”

Net Interest Income

Net interest income for the fourth quarter of 2022 decreased by $2.6 million, or 5.4% compared to the third quarter of 2022. Interest income increased by $4.0 million primarily driven by loan growth and higher interest rates. Interest expense increased by $6.5 million on increased rates and aggressive competition. Accretion income declined by $0.3 million for the quarter to $0.6 million.

In comparison to the fourth quarter of 2021, net interest income increased $2.9 million, or 6.9%. The increase was primarily the result of organic loan growth, higher interest rates, and the acquisition of Jefferson.

Net Interest Margin

Net interest margin, on a tax equivalent basis, was 3.07% for the fourth quarter of 2022, which was a decrease of 14 basis points compared to the prior quarter. Lower accretion income represented 2 basis points of the decline for the quarter. Earning asset yields increased by 30 basis points, while the average cost of funds increased 44 basis points.

In comparison to the fourth quarter of last year, the net interest margin decreased 4 basis points. The primary reason for the decrease was due to PPP fee income being lower by $1.7 million compared to the fourth quarter of 2021. Earning asset yields increased 70 basis points, while the average cost of funds increased 74 basis points.

Loan Portfolio

Total loans ended the quarter at $4.83 billion, representing an increase of $105.9 million, or 2.2%, compared to the prior quarter. The growth in the quarter was primarily in farm real estate, CRE and C&I. While the pipeline remains solid, we do anticipate it softening based on the macroeconomic conditions. As we have experienced in the past, we expect seasonal line paydowns in agricultural operating lines during the first quarter of 2023.

Asset Quality

First Mid’s asset quality continues to be very strong and well positioned if an economic downturn occurs. Nonperforming loans decreased by $1.6 million in the period and the ratio of nonperforming loans to total loans decreased to 0.40%. The allowance for credit losses (“ACL”) to nonperforming loans increased to 308.3%. As of December 31, 2022, the ACL increased by $0.3 million to $59.1 million with an ending ACL to total loans ratio of 1.22%. In addition, the Company has $7.0 million, or 15 basis points, of discount remaining on purchased loans. Provision expense was recorded in the amount of $0.8 million and net charge offs totaled $0.5 million. Special mention loans increased by $14.6 million, while substandard loans decreased by $3.0 million.

Deposits

Total deposits ended the quarter at $5.26 billion, which represented a decrease of $226.2 million, or 4.1%, from the prior quarter. The decrease was primarily in money market and noninterest bearing deposits. The Company has experienced increased competition from brokerage firms and community banks. In some cases, we are successful in maintaining the customer’s funds within the Company, but off balance sheet by providing our own wealth management solutions. The Company’s average rate on cost of funds was 1.00% compared to 0.56% in the prior quarter, and 0.26% versus the fourth quarter of 2021.

Noninterest Income

Noninterest income for the fourth quarter of 2022 was $18.2 million compared to $16.8 million in the third quarter of 2022. The increase was primarily driven by the seasonality in insurance and wealth management revenues from farmland sales. Wealth management and insurance revenue increased $1.4 million and $0.6 million, respectively, from the prior quarter. Mortgage banking represented the largest decline in the period.

In comparison to the fourth quarter of 2021, noninterest income increased $0.1 million, or 0.5%. The increase was primarily driven by a $0.6 million increase in insurance and a $0.3 million increase in service charges, offsetting a $0.8 million decline in mortgage banking.

Noninterest Expenses

Noninterest expense for the fourth quarter of 2022 totaled $39.4 million, which was a decrease of $2.2 million compared to the prior quarter. The current quarter included $0.2 million of nonrecurring integration expenses for the Jefferson acquisition compared to $0.7 million in the third quarter. The Company has increased its emphasis in its ongoing effort to identify and implement cost savings initiatives to drive a more efficient operations.

In comparison to the fourth quarter of 2021, noninterest expenses increased $3.0 million. The increase was primarily driven by the additional expense related to the Jefferson acquisition and inflationary cost increases.

The Company’s efficiency ratio, as adjusted in the non-GAAP reconciliation table herein, for the fourth quarter 2022 was 58.1% compared to 59.6% in the prior quarter and 55.8% for the same period last year.

Capital Levels, Dividend and Taxes

The Company’s capital levels remained strong and comfortably above the “well capitalized” levels. Capital levels ended the period as follows:

The Company’s Board of Directors approved a regular quarterly dividend of $0.23 payable on March 1, 2023 for shareholders of record on February 15, 2023.

The Company’s effective tax rate for the fourth quarter was 12.9% compared to 23.2% in the prior quarter. The primary reason for the lower tax rate was a $2.5 million credit in the current quarter. The credit was due to the removal of a deferred tax liability that was no longer applicable.

About First Mid: First Mid Bancshares, Inc. (“First Mid”) is the parent company of First Mid Bank & Trust, N.A., First Mid Insurance Group, Inc., and First Mid Wealth Management Co. First Mid is a $6.7 billion community-focused organization that provides a full-suite of financial services including banking, wealth management, brokerage, Ag services, and insurance through a sizeable network of locations throughout Illinois, Missouri, and Texas, and a loan production office in the greater Indianapolis area. Together, our First Mid team takes great pride in providing solutions and services to the customers and communities and has done so over the last 157 years. More information about the Company is available on our website at www.firstmid.com.

Non-GAAP Measures: In addition to reports presented in accordance with generally accepted accounting principles (“GAAP”), this release contains certain non-GAAP financial measures. The Company believes that such non-GAAP financial measures provide investors with information useful in understanding the Company’s financial performance. Readers of this release, however, are urged to review these non-GAAP financial measures in conjunction with the GAAP results as reported. These non-GAAP financial measures are detailed as supplemental tables and include “Adjusted Net Income,” “Adjusted Diluted EPS,” “Efficiency Ratio,” “Net Interest Margin, tax equivalent,” and “Tangible Book Value per Common Share”. While the Company believes these non-GAAP financial measures provide investors with a broader understanding of the capital adequacy, funding profile and financial trends of the Company, this information should be considered as supplemental in nature and not as a substitute to the related financial information prepared in accordance with GAAP. These non-GAAP financial measures may also differ from the similar measures presented by other companies.

Forward Looking Statements
This document may contain certain forward-looking statements about First Mid, such as discussions of First Mid’s pricing and fee trends, credit quality and outlook, liquidity, new business results, expansion plans, anticipated expenses, and planned schedules. First Mid intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of First Mid, are identified by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,” or similar expressions. Actual results could differ materially from the results indicated by these statements because the realization of those results is subject to many risks and uncertainties, including, among other things, changes in interest rates; general economic conditions and those in the market areas of First Mid; legislative and/or regulatory changes; monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board; the quality or composition of First Mid’s loan or investment portfolios and the valuation of those investment portfolios; demand for loan products; deposit flows; competition, demand for financial services in the market areas of First Mid; accounting principles, policies and guidelines; the severity, magnitude and duration of the COVID-19 pandemic, the direct and indirect impact of such pandemic, including responses to the pandemic by the U.S., state and local governments, customers' businesses, the disruption of global, national, state and local economies associated with the COVID-19 pandemic, which could affect First Mid’s liquidity and capital positions, impair the ability of First Mid’s borrowers to repay outstanding loans, impair collateral values, and further increase the allowance for credit losses, and the impact of the COVID-19 pandemic on First Mid’s financial results, including possible lost revenue and increased expenses (including cost of capital), as well as possible goodwill impairment charges. Additional information concerning First Mid, including additional factors and risks that could materially affect First Mid’s financial results, are included in First Mid’s filings with the SEC, including its Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q. Forward-looking statements speak only as of the date they are made. Except as required under the federal securities laws or the rules and regulations of the SEC, we do not undertake any obligation to update or review any forward-looking information, whether as a result of new information, future events or otherwise.

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

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

– Tables Follow –