About First Mid Bancshares

First Mid Bancshares, Inc. operates a financial holding company. The company engages 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. (First Mid Insurance). The company offers trust, farm services, investment services, and retirement planning. Commercial Real Estate Loans: Commercial real estate loans are generally consist of loans to small business entities to purchase or expand structures in which the business operations are housed, loans to owners of real estate who lease space to non-related commercial entities, loans for construction and land development, loans to hotel operators, and loans to owners of multi-family residential structures, such as apartment buildings. Commercial real estate loans are underwritten based on historical and projected cash flows of the borrower and secondarily on the underlying real estate pledged as collateral on the debt. For the various types of commercial real estate loans, minimum criteria have been established within the company’s loan policy regarding debt service coverage while maximum limits on loan-to-value and amortization periods have been defined. Maximum loan- to-value ratios range from 65% to 80% depending upon the type of real estate collateral, while the desired minimum debt coverage ratio is 1.20x. Amortization periods for commercial real estate loans are generally limited to twenty years. The company’s commercial real estate portfolio is well below the thresholds that would designate a concentration in commercial real estate lending, as established by the federal banking regulators. Commercial and Industrial Loans: Commercial and industrial loans are primarily comprised of working capital loans used to purchase inventory and fund accounts receivable that are secured by business assets other than real estate. These loans are generally written for one year or less. Also, equipment financing is provided to businesses with these loans generally limited to 80% of the value of the collateral and amortization periods limited to seven years. Commercial loans are often accompanied by a personal guaranty of the principal owners of a business. Like commercial real estate loans, the underlying cash flow of the business is the primary consideration in the underwriting process. The financial condition of commercial borrowers is monitored at least annually with the type of financial information required determined by the size of the relationship. Measures employed by the company for businesses with higher risk profiles include the use of government-assisted lending programs through the Small Business Administration and the U.S. Department of Agriculture. Agricultural and Agricultural Real Estate Loans: Agricultural loans are generally comprised of seasonal operating lines to cash grain farmers to plant and harvest corn and soybeans and term loans to fund the purchase of equipment. Agricultural real estate loans are primarily comprised of loans for the purchase of farmland. Specific underwriting standards have been established for agricultural-related loans, including the establishment of projections for each operating year based on industry developed estimates of farm input costs and expected commodity yields and prices. Operating lines are typically written for one year and secured by the crop. Loan-to-value ratios on loans secured by farmland generally do not exceed 65% and have amortization periods limited to twenty-five years. Federal government-assistance lending programs through the Farm Service Agency are used to mitigate the level of credit risk when deemed appropriate. Residential Real Estate Loans: Residential real estate loans generally include loans for the purchase or refinance of residential real estate properties consisting of one-to-four units and home equity loans and lines of credit. The company sells the vast majority of its long-term fixed rate residential real estate loans to secondary market investors. The company also releases the servicing of these loans upon sale. The company retains all residential real estate loans with balloon payment features. Balloon periods are limited to five years. Residential real estate loans are typically underwritten to conform to industry standards, including criteria for maximum debt-to-income and loan-to-value ratios, as well as minimum credit scores. Loans secured by first liens on residential real estate held in the portfolio typically do not exceed 80% of the value of the collateral and have amortization periods of twenty-five years or less. Consumer Loans: Consumer loans are primarily comprised of loans to individuals for personal and household purposes, such as the purchase of an automobile or other living expenses. Minimum underwriting criteria have been established that consider credit score, debt-to-income ratio, employment history, and collateral coverage. Typically, consumer loans are set up on monthly payments with amortization periods based on the type and age of the collateral. Other Loans: Other loans consist primarily of loans to municipalities to support community projects such as infrastructure improvements or equipment purchases. Underwriting guidelines for these loans are consistent with those established for commercial loans with the additional repayment source of the taxing authority of the municipality. Allowance for Credit Losses The allowance for credit losses represents the company’s best estimate of the reserve necessary to adequately account for probable losses expected over the remaining contractual life of the assets. The provision for credit losses is the charge against current earnings that is determined by the company as the amount needed to maintain an adequate allowance for credit losses. In determining the adequacy of the allowance for credit losses, and therefore the provision to be charged to earnings, the company relies predominantly on a disciplined credit review and approval process that extends to the full range of the company’s credit exposure. The review process is directed by the overall lending policy and is intended to identify, at the earliest possible stage, borrowers who might be facing financial difficulty. Factors considered by the company in evaluating the overall adequacy of the allowance include historical net loan losses, the level and composition of nonaccrual, past due and troubled debt restructurings, trends in volumes and terms of loans, effects of changes in risk selection and underwriting standards or lending practices, lending staff changes, concentrations of credit, industry conditions and the current economic conditions in the region where the company operates. The company estimates the appropriate level of allowance for credit losses by evaluating large, impaired loans separately from non-impaired loans. Individually Evaluated loans The company individually evaluates certain loans for impairment. In general, these loans have been internally identified via the Company’s loan grading system as credits requiring management’s attention due to underlying problems in the borrower’s business or collateral concerns. This evaluation considers expected future cash flows, the value of collateral and other factors that may impact the borrower’s ability to make payments when due. For loans greater than $250,000, impairment is individually measured each quarter using one of three alternatives: the present value of expected future cash flows discounted at the loan’s effective interest rate; the loan’s observable market price, if available; or the fair value of the collateral less costs to sell for collateral dependent loans and loans for which foreclosure is deemed to be probable. Investment Portfolio As of December 31, 2022, the company’s investment portfolio included U.S. treasury securities and obligations of U.S. government corporations and agencies; obligations of state and political subdivisions; mortgage-backed securities (GSE residential); and other securities. Deposits As of December 31, 2022, the company’s deposits included demand deposits, such as interest-bearing and non-interest-bearing; savings; money market; and time deposits. Strategy Growth through acquisitions is an integral part of the company’s strategy for an extended period of time. Supervision and Regulation As a registered financial holding company under the Bank Holding Company Act of 1956 (BHCA) that has elected to become a financial holding company under the 1999 Gramm-Leach-Bliley Act (GLB Act), the company is subject to regulation by the Federal Reserve Board. In accordance with Federal Reserve Board policy, the company is expected to act as a source of financial strength to First Mid Bank and to commit resources to support First Mid Bank in circumstances where the company might not do so absent such policy. The company is subject to inspection, examination, and supervision by the Federal Reserve Board. The system of supervision and regulation applicable to the company and its subsidiaries establishes a comprehensive framework for their respective operations and is intended primarily for the protection of the FDIC’s deposit insurance fund and the depositors, rather than the stockholders, of financial institutions. The Change in Bank Control Act prohibits a person or group of people from acquiring control of a bank holding company unless the Federal Reserve Board has been notified and has not objected to the transaction. Under a rebuttable presumption established by the Federal Reserve Board, the acquisition of 10% or more of a class of voting stock of a bank holding company with a class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended, such as the company, would, under the circumstances set forth in the presumption, constitute acquisition of control of the company. In addition, any company is required to obtain the approval of the Federal Reserve Board under the BHCA before acquiring 25% (5% in the case of an acquirer that is a bank holding company) or more of the outstanding common of the company, or otherwise obtaining control of a controlling influence over the company or First Mid Bank. A bank holding company that is not also a financial holding company is limited to engaging in banking and such other activities as determined by the Federal Reserve Board to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. If any subsidiary bank of the company receives a rating under the Community Reinvestment Act of less than satisfactory, the company will be prohibited, until the rating is raised to satisfactory or better, from engaging in new activities or acquiring companies other than bank holding companies, banks, or savings associations. The bank is a national bank, chartered under the National Bank Act. The Federal Deposit Insurance Corporation (FDIC) insures the deposit accounts of the banks. The bank is a member of the Federal Reserve System and is subject to the examination, supervision, reporting and enforcement requirements of the Office of the Comptroller of the Currency (OCC), as the primary federal regulator of national banks, and the FDIC, as administrator of the deposit insurance fund. As an FDIC-insured institution, banks are required to pay deposit insurance premium assessments to the FDIC. The bank is subject to certain restrictions under federal law, including Regulation W of the Federal Reserve Board, on extensions of credit to the company and its subsidiaries, on investments in the stock or other securities of the company and its subsidiaries and the acceptance of the stock or other securities of the company or its subsidiaries as collateral for loans. The bank is subject to restrictions under federal law that limits certain transactions with the company, including loans, other extensions of credit, investments, or asset purchases. The bank is subject to the Community Reinvestment Act (CRA). The bank received satisfactory CRA ratings from its regulator in its most recent CRA examination. In addition to the laws and regulations, First Mid Bank is subject to certain consumer laws and regulations that are designed to protect consumers in transactions with banks. These laws and regulations include the Truth in Lending Act, the Truth in Savings Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Fair Credit Reporting Act, the Fair and Accurate Credit Transactions Act and the Real Estate Settlement Procedures Act, among others. History First Mid Bancshares, Inc. was founded in 1865. The company, a Delaware corporation, was incorporated in 1981. It was formerly known as First Mid-Illinois Bancshares, Inc. and changed its name to First Mid Bancshares, Inc. in 2019.