10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☒ No

See accompanying notes to unaudited condensed consolidated financial statements.

Condensed Consolidated Statements of Changes in Stockholders’ Equity (unaudited)

See accompanying notes to unaudited condensed consolidated financial statements.

Note 3 -- Investment Securities

The amortized cost, gross unrealized gains and losses and estimated fair values for available-for-sale and held-to-maturity securities by major security type at March 31, 2024 and December 31, 2023 were as follows (in thousands):


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Fair Value
March 31, 2024
Available-for-sale:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	234,540	$	—	$	(27,220	)	$	207,320
Obligations of states and political subdivisions		335,350		84		(52,864	)		282,570
Mortgage-backed securities: GSE residential		699,921		854		(119,771	)		581,004
Other securities		72,792		—		(4,259	)		68,533
Total available-for-sale	$	1,342,603	$	938	$	(204,114	)	$	1,139,427
Held-to-maturity:
Other investments	$	2,282	$	—	$	—		$	2,282
Total held-to-maturity	$	2,282	$	—	$	—		$	2,282
December 31, 2023
Available-for-sale:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	237,875	$	—	$	(26,219	)	$	211,656
Obligations of states and political subdivisions		337,835		152		(49,371	)		288,616
Mortgage-backed securities: GSE residential		714,216		1,158		(113,074	)		602,300
Other securities		73,795		—		(4,795	)		69,000
Total available-for-sale	$	1,363,721	$	1,310	$	(193,459	)	$	1,171,572
Held-to-maturity:
Other investments	$	2,286	$	—	$	—		$	2,286
Total held-to-maturity	$	2,286	$	—	$	—		$	2,286

The Company also had $4,298,000 and $4,074,000 of equity securities, at fair value, as of March 31, 2024 and December 31, 2023, respectively. The Company's held-to-maturity securities are annuities for which the risk of loss is minimal. As such, as of March 31, 2024, the Company did not record an allowance for credit losses on its held-to-maturity securities.

Realized gains and losses resulting from sales of securities were as follows during the three months ended March 31, 2024 and 2023 (in thousands):


	Three months ended
	March 31,
	2024		2023
Gross gains	$	—	$	6
Gross losses		—		(52	)

The following table indicates the expected maturities of investment securities classified as available-for-sale presented at fair value, and held-to-maturity presented at amortized cost, at March 31, 2024 and the weighted average yield for each range of maturities (dollars in thousands):


	One year or less			After 1 through 5 years			After 5 through 10 years			After ten years			Total
Available-for-sale:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	181,730		$	25,590		$	—		$	—		$	207,320
Obligations of state and political subdivisions		21,240			102,416			157,672			1,242			282,570
Mortgage-backed securities: GSE residential		2,280			6,030			33,981			538,713			581,004
Other securities		27,942			39,838			753			—			68,533
Total available-for-sale investments	$	233,192		$	173,874		$	192,406		$	539,955		$	1,139,427
Weighted average yield		1.75	%		2.62	%		2.25	%		1.82	%		2.00	%
Full tax-equivalent yield		1.75	%		2.63	%		2.22	%		1.84	%		2.00	%
Held to maturity:
Other investments	$	—		$	—		$	—		$	2,282		$	2,282
Total held-to-maturity	$	—		$	—		$	—		$	2,282		$	2,282
Weighted average yield		—	%		—	%		—	%		—	%		—	%
Full tax-equivalent yield		—	%		—	%		—	%		—	%		—	%

The weighted average yields are calculated based on the amortized cost and effective yields weighted for the scheduled maturity of each security. Tax-equivalent yields have been calculated using a 21% tax rate. With the exception of obligations of the U.S. Treasury and other U.S. government agencies and corporations, there were no investment securities of any single issuer, the book value of which exceeded 10% of stockholders' equity at March 31, 2024.

Investment securities carried at approximately $820 million and $831 million at March 31, 2024 and December 31, 2023, respectively, were pledged to secure public deposits and repurchase agreements and for other purposes as permitted or required by law.

The following table presents the aging of gross unrealized losses and fair value by investment category as of March 31, 2024 and December 31, 2023 (in thousands):


	Less than 12 months					12 months or more					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
March 31, 2024
Available-for-sale:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	1,295	$	—		$	206,025	$	(27,220	)	$	207,320	$	(27,220	)
Obligations of states and political subdivisions		27,302		(324	)		248,168		(52,540	)		275,470		(52,864	)
Mortgage-backed securities: GSE residential		5,773		(132	)		545,899		(119,639	)		551,672		(119,771	)
Other securities		5,337		(413	)		57,446		(3,846	)		62,783		(4,259	)
Total	$	39,707	$	(869	)	$	1,057,538	$	(203,245	)	$	1,097,245	$	(204,114	)
December 31, 2023
Available-for-sale:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	1,288	$	(4	)	$	210,069	$	(26,215	)	$	211,357	$	(26,219	)
Obligations of states and political subdivisions		22,281		(333	)		241,630		(49,038	)		263,911		(49,371	)
Mortgage-backed securities: GSE residential		5,818		(67	)		566,197		(113,007	)		572,015		(113,074	)
Other securities		5,311		(439	)		57,939		(4,356	)		63,250		(4,795	)
Total	$	34,698	$	(843	)	$	1,075,835	$	(192,616	)	$	1,110,533	$	(193,459	)

U.S. Treasury Securities and Obligations of U.S. Government Corporations and Agencies. At March 31, 2024 there were six hundred twenty-five available-for-sale securities with a fair value of $206.0 million and unrealized losses of $27.2 million in a continuous unrealized loss position for twelve months or more. At December 31, 2023, there were thirty-six available-for-sale securities with a fair value of $210.1 million and unrealized losses of $26.2 million in a continuous unrealized loss position for twelve months or more. There were no held-to-maturity U.S. Treasury securities and obligations of U.S. government corporations and agencies in a continuous unrealized loss position for twelve months or more.

Obligations of states and political subdivisions. At March 31, 2024, there were two hundred fifty-five obligations of states and political subdivisions with a fair value of $248.2 million and unrealized losses of $52.5 million in a continuous unrealized loss position for twelve months or more. At December 31, 2023 there were two hundred thirty-seven obligations of states and political subdivisions with a fair value of $241.6 million and unrealized losses of $49.0 million in a continuous unrealized loss position for twelve months or more.

Mortgage-backed Securities: GSE Residential. At March 31, 2024, there were two hundred sixty-three mortgage-backed securities with a fair value of $545.9 million and unrealized losses of $119.6 million in a continuous unrealized loss position for twelve months or more. At December 31, 2023, there were two hundred sixty-three mortgage-backed securities with a fair value of $566.2 million and unrealized losses of $113.0 million in a continuous unrealized loss position for twelve months or more.

Other securities. At March 31, 2024, there were forty-two other securities with a fair value of $57.4 million and unrealized losses of $3.8 million in a continuous unrealized loss position for twelve months or more. At December 31, 2023, there were forty-three other securities with a fair value of $57.9 million and unrealized losses of $4.4 million in a continuous unrealized loss position for twelve months or more.

Note 4 – Loans and Allowance for Credit Losses

Loans are stated at amortized cost net of an allowance for credit losses. Amortized cost is the unpaid principal net of unearned premiums and discounts, and net deferred origination fees and costs. Deferred loan origination fees are reduced by loan origination costs and are amortized to interest income over the life of the related loan using methods that approximated the effective interest rate method. Interest on substantially all loans is credited to income based on the principal amount outstanding.

A summary of loans at March 31, 2024 and December 31, 2023 follows (in thousands):


	March 31, 2024		December 31, 2023
Construction and land development	$	188,662	$	207,033
Agricultural real estate		389,691		392,265
1-4 family residential properties		525,532		549,843
Multifamily residential properties		315,024		321,537
Commercial real estate		2,424,919		2,416,294
Loans secured by real estate		3,843,828		3,886,972
Agricultural loans		213,171		196,202
Commercial and industrial loans		1,234,776		1,273,637
Consumer loans		80,514		92,142
All other loans		175,318		184,609
Total gross loans		5,547,607		5,633,562
Less: loans held for sale		4,817		4,980
		5,542,790		5,628,582
Less:
Net deferred loan fees, premiums and discounts		48,312		52,997
Allowance for credit losses		67,936		68,675
Net loans	$	5,426,542	$	5,506,910

Loans expected to be sold are classified as held for sale in the consolidated financial statements and are recorded at fair value, taking into consideration future commitments to sell the loans. These loans are primarily for 1-4 family residential properties.

Accrued interest on loans, which is excluded from the amortized cost of the balances above, totaled $31.3 million and $29.9 million at March 31, 2024 and December 31, 2023, respectively.

Most of the Company’s business activities are with customers located near the Company's branch locations in Illinois, Missouri, Texas, and Wisconsin. At March 31, 2024, the Company’s loan portfolio included $602.9 million of loans to borrowers whose businesses are directly related to agriculture. Of this amount, $488.5 million was concentrated in corn and other grain farming. Total loans to borrowers whose businesses are directly related to agriculture increased $14.4 million from $588.5 million at December 31, 2023 due to seasonal timing of cash flow requirements. Loans concentrated in corn and other grain farming increased $16.0 million from $472.5 million at December 31, 2023. The Company's underwriting practices include 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. The Company also has $1.06 billion of loans to lessors of non-residential buildings, and $549.3 million of loans to lessors of residential buildings and dwellings.

The structure of the Company’s loan approval process is based on progressively larger lending authorities granted to individual loan officers, loan committees, and ultimately the board of directors. Outstanding balances to one borrower or affiliated borrowers are limited by federal regulation and most borrowers are below regulatory thresholds. The Company can occasionally have outstanding balances to one borrower up to but not exceeding the regulatory threshold should underwriting guidelines warrant. Most of the Company’s loans are to businesses located in the geographic market areas served by the Company’s branch bank system. Additionally, a significant portion of the collateral securing the loans in the portfolio is located within the Company’s primary geographic footprint. In general, the Company adheres to loan underwriting standards consistent with industry guidelines for all loan segments.

The Company’s lending can be summarized into the following primary areas:

Commercial Real Estate Loans. Commercial real estate loans are generally comprised of loans to small business entities to purchase or expand structures in which the business operations are housed, loans to owners of real estate who lease space to non-related commercial entities, loans for construction and land development, loans to hotel 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 or twenty five years, depending on the loan-to-value. The Company’s commercial real estate portfolio is 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 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 most of its long-term fixed rate residential real estate loans to secondary market investors. The Company also releases the servicing of these loans upon sale. Residential real estate loans are typically underwritten to conform to industry standards including criteria for maximum debt-to-income and loan-to-value ratios as well as minimum credit scores. Loans secured by first liens on residential real estate held in the portfolio typically do not exceed 80% of the value of the collateral and have amortization periods of twenty-five years or less. The Company does not originate subprime mortgage loans.

Consumer Loans. Consumer loans are primarily comprised of loans to individuals for personal and household purposes such as the purchase of an automobile or other living expenses. Minimum underwriting criteria have been established that consider credit score, debt-to-income ratio, employment history, and collateral coverage. Typically, consumer loans are set up on monthly payments with amortization periods based on the type and age of the collateral.

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 current earnings, the Company relies predominantly on a disciplined credit review and approval process that extends to the full range of the Company’s credit exposure. The review process is directed by the overall lending policy and is intended to identify, at the earliest possible stage, borrowers who might be facing financial difficulty. Factors considered by the Company in evaluating the overall adequacy of the allowance include historical net loan losses, the level and composition of nonaccrual, past due and modified loans, trends in volumes and terms of loans, effects of changes in risk selection and underwriting standards or lending practices, lending staff changes, concentrations of credit, industry conditions and the current economic conditions in the region where the Company operates. The Company estimates the appropriate level of allowance for credit losses by evaluating large individually evaluated loans separately from non-individually evaluated 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: (1) the present value of expected future cash flows discounted at the loan’s effective interest rate; (2) the loan’s observable market price, if available; or (3) the fair value of the collateral less costs to sell for collateral dependent loans and loans for which foreclosure is deemed to be probable. A specific allowance is assigned when expected cash flows or collateral are less than the carrying amount of the loan. The carrying value of the loan reflects reductions from prior charge-offs.

Non-Individually Evaluated Loans

Non-individually evaluated loans comprise the vast majority of the Company’s total loan portfolio and include loans in accrual status and those credits not identified as modified loans. A small portion of these loans are considered “criticized” due to the risk rating assigned reflecting elevated credit risk due to characteristics, such as a strained cash flow position, associated with the individual borrowers. Criticized loans are those assigned risk ratings of Special Mention, Substandard, or Doubtful.

To determine the allowance, the loan portfolio is segmented based on similar risk characteristics. The allowance for credit losses is estimated using a discounted cash flow (DCF) methodology. The DCF projects future cash flows over the life of the loan portfolio. Probability of default (PD) and loss given default (LGD) are key components in calculating expected losses in this model. The PD is forecasted using a regression model that determines the likelihood of default with a forward-looking forecast of unemployment rates. The LGD is the percentage of defaulted loans that is ultimately charged off. The allowance is calculated as the net present value of the expected cash flows less the amortized cost basis of the loans. Prior to 2022, the allowance for credit losses was measured on a collective (pool) basis for non-individually evaluated loans with similar risk characteristics. Historical credit loss experience provided the basis for the estimate of expected credit losses. Adjustments to expected losses are made using qualitative factors for relevant to each loan segment including merger & acquisition activity, economic conditions, changes in policies, procedures & underwriting,

and concentrations. In addition, a forecast, using reasonable and supportable future conditions, is prepared that is used to estimate expected changes to existing and historical conditions in the current period.

The Company also considers specific current economic events occurring globally, in the U.S. and in its local markets. Events considered include the status of trade agreements with China, scheduled increases in minimum wage and changes to the minimum salary threshold for overtime provisions, current and projected unemployment rates, current and projected grain and oil prices and economies of local markets where customers work and operate.

Within each pool, risk elements are evaluated that have specific impacts to the borrowers within the pool. These, along with the general risks and events, and the specific lending policies and procedures by loan type described above, are analyzed to estimate the qualitative factors used to adjust the historical loss rates.

During the current period, the following assumptions and factors were considered when determining the historical loss rate and any potential adjustments by loan pool.

Construction and Land Development Loans. Historical losses in this segment remain very low. While staffing shortages and supply chain disruptions cause risk in this segment, most projects are associated with financially strong borrowers. The qualitative factors for this segment were increased due to higher levels of loans compared to the Company's internal policy limits

Agricultural Real Estate Loans. Historical losses in the segment remain very low. Farmland values have increased over an extended period of time and remained stable over the last year. There was no change to the qualitative factors for this segment.

1- 4 Family Residential Properties Loans. The loan segment has remained stable throughout the last several years. Both adversely classified and past dues have been consistent. There was no change to the qualitative factors for this segment.

Commercial Real Estate Loans. This segment includes the Company's largest balances and the largest allowance for credit losses. The qualitative factors on non-owner occupied loans for this segment were increased due to the economic uncertainty and rate repricing risks in today's market along with the level of balances compared to the Company's internal policy limits.

Agricultural Loans. Losses in this segment are very low. Commodity prices have been volatile and yield expectations have been lowered due to the lack of rain. The qualitative factors of this segment were increased due to this higher level of risk.

Commercial and Industrial Loans. This segment includes the second largest balance of allowance for credit losses. The qualitative factors for this segment were not changed in the periods . Most of the repricing for higher rates in this loan segment has already occurred.

Consumer Loans. This segment is the smallest portion of the Company's loan portfolio. This segment is anticipated to be impacted by any recession that may appear. In addition, the risk has increased for cash flow challenges for any borrower who have student loans that have been or will soon be returned to payments. The qualitative factors for this segment were not changed on a net basis in the period. Higher risk due to macro-economic conditions were offset by a decline in the severity of past dues for the loan segment.

Acquired Loans. Prior to January 1, 2020 loans acquired with evidence of credit deterioration since origination and for which it was probable that all contractually required payments would not be collected were considered purchased credit impaired at the time of acquisition. Purchase credit-impaired ("PCI") loans were accounted for under ASC 310-30, Receivables--Loans and Debt Securities Acquired with Deteriorated Credit Quality ("ASC 310-30"), and were initially measured at fair value, which included the estimated future credit losses expected to be incurred over the life of the loan.

Accordingly, an allowance for credit losses related to these loans was not carried over and recorded at the acquisition date. The cash flows expected to be collected were estimated using current key assumptions, such as default rates, value of underlying collateral, severity and prepayment speeds.

Subsequent to January 1, 2020, loans acquired in a business combination that have experienced more-than-insignificant deterioration in credit quality since origination are considered purchased credit deteriorated (“PCD”) loans. At the acquisition date, an estimate of expected credit losses is made for groups of PCD loans with similar risk characteristics and individual PCD loans without similar risk characteristics. This initial allowance for credit losses is allocated to individual PCD loans and added to the purchase price or acquisition date fair values to establish the initial amortized cost basis of the PCD loans. As the initial allowance for credit losses is added to the purchase price, there is no credit loss expense recognized upon acquisition of a PCD loan. Any difference between the unpaid principal balance of PCD loans and the amortized cost basis is considered to relate to noncredit factors and results in a discount or premium. Discounts and premiums are recognized through interest income on a level-yield method over the life of the loans.

For acquired loans not deemed purchased credit deteriorated at acquisition, the differences between the initial fair value and the unpaid principal balance are recognized as interest income on a level-yield basis over the lives of the related loans. At the acquisition date, an initial allowance for expected credit losses is estimated and recorded as credit loss expense. The subsequent measurement of expected credit losses for all acquired loans is the same as the subsequent measurement of expected credit losses for originated loans.

The following table presents the activity in the allowance for credit losses based on portfolio segment for the three months ended March 31, 2024 (in thousands):


	Construction and Land Development			Agricultural Real Estate			1-4 Family Residential Properties			Commercial Real Estate		Agricultural Loans		Commercial and Industrial			Consumer Loans		Total
Three months ended March 31, 2024
Beginning balance	$	2,918		$	1,366		$	4,220		$	31,758	$	705	$	25,450		$	2,258	$	68,675
Initial allowance on loans purchased with credit deterioration		—			—			—			—		—		—			—		—
Provision for credit loss expense		(217	)		(8	)		(424	)		618		125		(609	)		158		(357	)
Loans charged off		—			—			67			—		52		274			426		819
Recoveries collected		—			—			49			161		—		64			163		437
Ending balance	$	2,701		$	1,358		$	3,778		$	32,537	$	778	$	24,631		$	2,153	$	67,936

The following tables present the activity in the allowance for credit losses based on portfolio segment for the three months ended March 31, 2023 and for the year ended December 31, 2023 (in thousands):


	Construction and Land Development		Agricultural Real Estate			1-4 Family Residential Properties			Commercial Real Estate			Agricultural Loans			Commercial and Industrial		Consumer Loans		Total
Three months ended March 31, 2023
Beginning balance	$	2,250	$	1,433		$	3,742		$	28,157		$	585		$	20,808	$	2,118	$	59,093
Initial allowance on loans purchased with credit deterioration		—		—			—			—			—			—		—		—
Provision for credit loss expense		176		(29	)		(306	)		(834	)		(8	)		91		93		(817	)
Loans charged off		—		—			40			—			—			13		427		480
Recoveries collected		—		—			24			4			3			256		140		427
Ending balance	$	2,426	$	1,404		$	3,420		$	27,327		$	580		$	21,142	$	1,924	$	58,223

Twelve months ended December 31, 2023
Beginning Balance	$	2,250	$	1,433		$	3,742		$	28,157		$	585		$	20,808	$	2,118	$	59,093
Initial allowance on loans purchased with credit deterioration		308		—			124			1,066			—			2,273		20		3,791
Provision for credit loss expense		374		(67	)		225			1,755			490			2,322		1,005		6,104
Loans charged off		14		—			87			25			408			529		1,568		2,631
Recoveries collected		—		—			216			805			38			576		683		2,318
Ending balance	$	2,918	$	1,366		$	4,220		$	31,758		$	705		$	25,450	$	2,258	$	68,675

Consistent with regulatory guidance, charge-offs on all loan segments are taken when specific loans, or portions thereof, are considered uncollectible. The Company’s policy is to promptly charge these loans off in the period the uncollectible loss is reasonably determined.

For all loan portfolio segments except 1-4 family residential properties and consumer, the Company promptly charges-off loans, or portions thereof, when available information confirms that specific loans are uncollectible based on information that includes, but is not limited to, (1) the deteriorating financial condition of the borrower, (2) declining collateral values, and/or (3) legal action, including bankruptcy, that impairs the borrower’s ability to adequately meet its obligations. For individually evaluated loans that are considered solely collateral dependent, a partial charge-off is recorded when a loss has been confirmed by an updated appraisal or other appropriate valuation of the collateral.

The Company charges-off 1-4 family residential and consumer loans, or portions thereof, when the Company reasonably determines the amount of the loss. The Company adheres to time frames established by applicable regulatory guidance which provides for the charge-down of 1-4 family first and junior lien mortgages to the net realizable value less costs to sell when the loan is 180 days past due, charge-off of unsecured open-end loans when the loan is 180 days past due, and charge down to the net realizable value when other secured loans are 120 days past due. Loans at these respective delinquency thresholds for which the Company can clearly document that the loan is both well-secured and in the process of collection, such that collection will occur regardless of delinquency status, need not be charged off.

The following table presents the amortized cost basis of collateral-dependent loans by class of loans that were individually evaluated to determine expected credit losses, and the related allowance for credit losses, as of March 31, 2024 (in thousands):


	Collateral								Allowance
	Real Estate		Business Assets		Other		Total		for Credit Losses
Construction and land development	$	406	$	—	$	—	$	406	$	175
1-4 family residential properties		1,174		—		—		1,174		—
Multifamily residential properties		1,066		—		—		1,066		—
Commercial real estate		8,349		—		—		8,349		133
Loans secured by real estate		10,995		—		—		10,995		308
Agricultural loans		—		—		—		—		—
Commercial and industrial loans		—		506		—		506		—
Consumer loans		—		—		—		—		—
Total loans	$	10,995	$	506	$	—	$	11,501	$	308

Credit Quality

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, collateral support, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on a continuous basis. The Company uses the following definitions for risk ratings which are commensurate with a loan considered “criticized”:

Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard. Loans classified as substandard are inadequately protected by the current sound-worthiness and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, based on currently existing factors, conditions and values, highly questionable and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered pass rated loans.

The following tables present the credit risk profile of the Company’s loan portfolio on amortized cost basis based on risk rating category and year of origination as of March 31, 2024 (in thousands):


	Term Loans by Origination Year												Revolving
Risk rating	2024		2023		2022		2021		2020		Prior		Loans		Total
March 31, 2024
Construction and land development loans
Pass	$	3,584	$	81,753	$	56,302	$	16,509	$	5,781	$	22,499	$	—	$	186,428
Special mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		423		—		423
Total	$	3,584	$	81,753	$	56,302	$	16,509	$	5,781	$	22,922	$	—	$	186,851
Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Agricultural real estate loans
Pass	$	8,930	$	18,867	$	162,999	$	56,265	$	52,598	$	83,981	$	—	$	383,640
Special mention		1,170		202		—		628		—		1,864		—		3,864
Substandard		—		—		—		367		—		1,070		—		1,437
Total	$	10,100	$	19,069	$	162,999	$	57,260	$	52,598	$	86,915	$	—	$	388,941
Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
1-4 family residential property loans
Pass	$	18,806	$	58,463	$	95,956	$	94,556	$	78,221	$	83,227	$	70,050	$	499,279
Special mention		—		—		853		3,143		—		3,847		—		7,843
Substandard		26		113		920		514		553		8,817		576		11,519
Total	$	18,832	$	58,576	$	97,729	$	98,213	$	78,774	$	95,891	$	70,626	$	518,641
Current period gross writeoffs	$	—	$	36	$	—	$	—	$	—	$	31	$	—	$	67
Commercial real estate loans
Pass	$	9,482	$	206,109	$	706,392	$	570,053	$	321,198	$	865,221	$	—	$	2,678,455
Special mention		10		3,634		2,854		1,716		824		8,647		—		17,685
Substandard		—		—		3,761		450		10		8,489		—		12,710
Total	$	9,492	$	209,743	$	713,007	$	572,219	$	322,032	$	882,357	$	—	$	2,708,850
Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Agricultural loans
Pass	$	38,758	$	121,171	$	30,478	$	16,192	$	3,396	$	1,852	$	—	$	211,847
Special mention		—		11		—		—		—		748		—		759
Substandard		—		221		368		—		6		16		—		611
Total	$	38,758	$	121,403	$	30,846	$	16,192	$	3,402	$	2,616	$	—	$	213,217
Current period gross writeoffs	$	—	$	—	$	—	$	52	$	—	$	—	$	—	$	52
Commercial and industrial loans
Pass	$	33,234	$	278,618	$	305,634	$	233,432	$	139,860	$	375,188	$	—	$	1,365,966
Special mention		103		1,061		1,528		7,073		1,359		24,394		—		35,519
Substandard		—		—		597		351		44		749		—		1,741
Total	$	33,337	$	279,679	$	307,759	$	240,856	$	141,263	$	400,331	$	—	$	1,403,226
Current period gross writeoffs	$	—	$	—	$	—	$	273	$	—	$	1	$	—	$	274
Consumer loans
Pass	$	1,612	$	8,161	$	36,304	$	17,758	$	8,383	$	6,473	$	—	$	78,691
Special mention		—		—		23		—		—		—		—		23
Substandard		—		50		338		241		141		85		—		855
Total	$	1,612	$	8,211	$	36,665	$	17,999	$	8,524	$	6,558	$	—	$	79,569
Current period gross writeoffs	$	—	$	3	$	51	$	81	$	—	$	291	$	—	$	426
Total loans
Pass	$	114,406	$	773,142	$	1,394,065	$	1,004,765	$	609,437	$	1,438,441	$	70,050	$	5,404,306
Special mention		1,283		4,908		5,258		12,560		2,183		39,500		—		65,693
Substandard		26		384		5,984		1,923		754		19,649		576		29,296
Total	$	115,715	$	778,434	$	1,405,307	$	1,019,248	$	612,374	$	1,497,590	$	70,626	$	5,499,295
Current period gross writeoffs	$	—	$	39	$	51	$	406	$	—	$	323	$	—	$	819

The following tables present the credit risk profile of the Company’s loan portfolio based on risk rating category as of December 31, 2023 (in thousands):


	Term Loans by Origination Year												Revolving
Risk rating	2023		2022		2021		2020		2019		Prior		Loans		Total
December 31, 2023
Construction and land development loans
Pass	$	68,086	$	74,065	$	27,392	$	5,188	$	10,795	$	19,115	$	—	$	204,641
Special mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		436		—		436
Total	$	68,086	$	74,065	$	27,392	$	5,188	$	10,795	$	19,551	$	—	$	205,077
Current period gross writeoffs	$	—	$	—	$	—	$	—	$	14	$	—	$	—	$	14
Agricultural real estate loans
Pass	$	19,231	$	164,812	$	57,815	$	53,249	$	19,419	$	71,189	$	—	$	385,715
Special mention		206		—		627		—		1,170		1,868		—		3,871
Substandard		—		—		371		—		—		1,175		—		1,546
Total	$	19,437	$	164,812	$	58,813	$	53,249	$	20,589	$	74,232	$	—	$	391,132
Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
1-4 family residential property loans
Pass	$	66,119	$	96,995	$	79,085	$	73,073	$	26,854	$	105,257	$	75,700	$	523,083
Special mention		—		967		3,184		—		—		3,804		10		7,965
Substandard		152		759		460		396		288		8,865		501		11,421
Total	$	66,271	$	98,721	$	82,729	$	73,469	$	27,142	$	117,926	$	76,211	$	542,469
Current period gross writeoffs	$	10	$	—	$	—	$	—	$	14	$	63	$	—	$	87
Commercial real estate loans
Pass	$	185,628	$	680,099	$	548,733	$	317,075	$	239,323	$	701,464	$	—	$	2,672,322
Special mention		3,666		2,706		1,317		2,159		1,563		7,778		—		19,189
Substandard		—		3,899		520		20		775		7,108		—		12,322
Total	$	189,294	$	686,704	$	550,570	$	319,254	$	241,661	$	716,350	$	—	$	2,703,833
Current period gross writeoffs	$	—	$	—	$	—	$	—	$	25	$	—	$	—	$	25
Agricultural loans
Pass	$	147,993	$	27,895	$	10,044	$	2,549	$	1,883	$	5,854	$	—	$	196,218
Special mention		6		10		—		—		38		—		—		54
Substandard		—		—		—		—		—		—		—		—
Total	$	147,999	$	27,905	$	10,044	$	2,549	$	1,921	$	5,854	$	—	$	196,272
Current period gross writeoffs	$	—	$	276	$	—	$	—	$	—	$	132	$	—	$	408
Commercial and industrial loans
Pass	$	290,304	$	306,794	$	232,198	$	154,499	$	73,906	$	347,957	$	—	$	1,405,658
Special mention		1,047		1,857		9,982		562		597		28,900		—		42,945
Substandard		—		537		791		58		29		750		—		2,165
Total	$	291,351	$	309,188	$	242,971	$	155,119	$	74,532	$	377,607	$	—	$	1,450,768
Current period gross writeoffs	$	—	$	353	$	—	$	49	$	20	$	107	$	—	$	529
Consumer loans
Pass	$	9,547	$	40,225	$	21,264	$	10,387	$	4,475	$	4,035	$	—	$	89,933
Special mention		—		26		—		—		—		—		—		26
Substandard		86		405		325		139		59		41		—		1,055
Total	$	9,633	$	40,656	$	21,589	$	10,526	$	4,534	$	4,076	$	—	$	91,014
Current period gross writeoffs	$	22	$	177	$	89	$	10	$	7	$	1,075	$	—	$	1,380
Total loans
Pass	$	786,908	$	1,390,885	$	976,531	$	616,020	$	376,655	$	1,254,871	$	75,700	$	5,477,570
Special mention		4,925		5,566		15,110		2,721		3,368		42,350		10		74,050
Substandard		238		5,600		2,467		613		1,151		18,375		501		28,945
Total	$	792,071	$	1,402,051	$	994,108	$	619,354	$	381,174	$	1,315,596	$	76,211	$	5,580,565
Current period gross writeoffs	$	10	$	761	$	208	$	51	$	93	$	1,508	$	—	$	2,631

The following table presents the Company’s loan portfolio aging analysis at March 31, 2024 and December 31, 2023 (in thousands):


	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans Receivable		Total Loans > 90 Days and Accruing
March 31, 2024
Construction and land development	$	—	$	—	$	450	$	450	$	186,401	$	186,851	$	—
Agricultural real estate		—		—		1		1		388,940		388,941		—
1-4 family residential properties		1,965		1,227		1,179		4,371		514,270		518,641		—
Multifamily residential properties		—		—		551		551		312,207		312,758		—
Commercial real estate		1,784		4,319		3,852		9,955		2,386,137		2,396,092		—
Loans secured by real estate		3,749		5,546		6,033		15,328		3,787,955		3,803,283		—
Agricultural loans		—		25		596		621		212,596		213,217		—
Commercial and industrial loans		228		261		889		1,378		1,226,528		1,227,906		—
Consumer loans		245		31		216		492		79,077		79,569		—
All other loans		—		—		—		—		175,320		175,320		—
Total loans	$	4,222	$	5,863	$	7,734	$	17,819	$	5,481,476	$	5,499,295	$	—
December 31, 2023
Construction and land development	$	—	$	585	$	450	$	1,035	$	204,042	$	205,077	$	—
Agricultural real estate		—		—		1		1		391,131		391,132		—
1-4 family residential properties		3,054		530		1,018		4,602		537,867		542,469		—
Multifamily residential properties		150		—		551		701		318,428		319,129		—
Commercial real estate		819		74		3,765		4,658		23,800,446		2,384,704		—
Loans secured by real estate		4,023		1,189		5,785		10,997		3,831,514		3,842,511		—
Agricultural loans		—		—		—		—		196,272		196,272		—
Commercial and industrial loans		673		73		1,531		2,277		1,263,882		1,266,159		—
Consumer loans		983		162		330		1,475		89,539		91,014		—
All other loans		—		—		—		—		184,609		184,609		—
Total loans	$	5,679	$	1,424	$	7,646	$	14,749	$	5,565,816	$	5,580,565	$	—

Individually Evaluated Loans

Within all loan portfolio segments, loans are considered impaired when, based on current information and events, it is probable the Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. The entire balance of a loan is considered delinquent if the minimum payment contractually required to be made is not received by the specified due date. Impaired loans, excluding certain modified, are placed on nonaccrual status. Impaired loans include nonaccrual loans and loans modified in restructuring where concessions have been granted to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection. It is the Company’s policy to have any restructured loans which are on nonaccrual status prior to being modified remain on nonaccrual status until, in the opinion of management, the financial position of the borrower indicates there is no longer any reasonable doubt as to the timely collection of interest or principal. If the restructured loan is on accrual status prior to being modified, the loan is reviewed to determine if the modified loan should remain on accrual status.

The Company’s policy is to discontinue the accrual of interest income on all loans for which principal or interest is ninety days past due. The accrual of interest is discontinued earlier when, in the opinion of management, there is reasonable doubt as to the timely collection of interest or principal. Once interest accruals are discontinued, accrued but uncollected interest is charged against current year income. Subsequent receipts on non-accrual loans are recorded as a reduction of principal, and interest income is recorded only after principal recovery is reasonably assured. Interest on loans determined to be modified is recognized on an accrual basis in accordance with the restructured terms if the loan is in compliance with the modified terms. Nonaccrual loans are returned to accrual status when, in the opinion of management, the financial position of the borrower indicates there is no longer any reasonable doubt as to the timely collection of interest or principal. The Company requires a period of satisfactory performance of not less than six months before returning a nonaccrual loan to accrual status.

The amount of interest income recognized by the Company within the periods stated above was due to loans modified in restructuring that remain on accrual status.

Non-Accrual Loans

The following table presents the amortized cost basis of loans on nonaccrual status and of nonaccrual loans individually evaluated for which no allowance was recorded as of March 31, 2024 and December 31, 2023 (in thousands). There were no loans past due over eighty-nine days that were still accruing.


	March 31, 2024				December 31, 2023
	Nonaccrual with no Allowance for		Total		Nonaccrual with no Allowance for		Total
	Credit Loss		Nonaccrual		Credit Loss		Nonaccrual
Construction and land development	$	—	$	—	$	—	$	—
Agricultural real estate		1,135		1,135		1,146		1,146
1-4 family residential properties		4,705		4,964		4,679		4,940
Multifamily residential properties		—		—		—		—
Commercial real estate		9,463		10,105		10,237		10,237
Loans secured by real estate		15,303		16,204		16,062		16,323
Agricultural loans		596		596		—		—
Commercial and industrial loans		1,501		1,501		1,931		1,931
Consumer loans		492		492		578		578
All other loans		—		—		—		—
Total loans	$	17,892	$	18,793	$	18,571	$	18,832

Interest income that would have been recorded under the original terms of such nonaccrual loans totaled $267,000 and $79,000 for the three months ended March 31, 2024 and 2023, respectively.

Loan Modification Disclosures Pursuant to ASU 2022-02

The following table shows the amortized cost of loans at March 31, 2024 and 2023 that were both experiencing financial difficulty and modified segregated by portfolio segment and type of modification. The percentage of the amortized cost of loans that were modified to borrowers in financial distress as compared to outstanding loans is also presented below.


									Total
			Payment		Term		Interest		Class of
	Principal		Delay		Extension		Rate		Financing
	Forgiveness		Investment		Modifications		Reduction		Receivable

March 31, 2024
Agricultural real estate	$	—	$	325	$	—	$	—		0.01	%
1-4 family residential properties		—		52		795		—		0.02	%
Commercial real estate		—		719		126		532		0.03	%
Loans secured by real estate		—		1,096		921		532		0.05	%
Commercial and industrial loans		—		185		196		—		0.01	%
Consumer loans		—		6		12		—		—	%
Total	$	—	$	1,287	$	1,129	$	532		0.05	%
March 31, 2023
Agricultural real estate	$	—	$	347	$	—	$	—		0.09	%
1-4 family residential properties		—		62		880		—		0.22	%
Commercial real estate		—		826		91		—		0.05	%
Loans secured by real estate		—		1,235		971		—		0.07	%
Commercial and industrial loans		—		421		319		—		0.07	%
Consumer loans		—		8		45		—		0.06	%
Total	$	—	$	1,664	$	1,335	$	—		0.06	%

The Company closely monitors the performance of loans that have been modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table shows the performance of such loans that have been modified in the last twelve months ended March 31, 2024 and 2023.


	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due
March 31, 2024
Commercial real estate	$	—	$	—	$	—	$	—
Loans secured by real estate		—		—		—		—
Total loans	$	—	$	—	$	—	$	—
March 31, 2023
Commercial real estate	$	—	$	55	$	—	$	55
Loans secured by real estate		—		55		—		55
Total loans	$	—	$	55	$	—	$	55

The following table shows the financial effect of loan modifications during the current quarter to borrowers experiencing financial difficulty for the three months ended March 31, 2024 and 2023.


	Weighted Average			Weighted Average
	Interest Rate			Term Extension
	Reduction			(in months)
March 31, 2024
Commercial and industrial loans		—	%		6.59
Consumer loans		—	%		—
		—	%		6.59
March 31, 2023
Commercial and industrial loans		4.75	%		5.13
Consumer loans		—	%		3.00
		4.75	%		4.93

A loan is considered to be in payment default once it is 90 days past due under the modified terms. There were no loans modified during the prior twelve months that experienced defaults for three months ended March 31, 2024 or for the three months ended March 31, 2023.

Purchased Credit Deteriorated (PCD) Loans

The Company has acquired loans, for which there was, at acquisition, evidence of more than insignificant deterioration of credit quality since origination. The carrying amount of those loans at acquisition date is as follows (in thousands):


	2023
	Blackhawk Acquisition
Purchase price of purchase credit deteriorated loans at acquisition	$	115,250
Allowance for credit losses at acquisition		(3,791	)
Non-credit discount/(premium) at acquisition		(5,476	)
Fair value of purchased credit deteriorated loans at acquisition	$	105,983

Note 7 -- Fair Value of Assets and Liabilities

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs. There is a hierarchy of three levels of inputs that may be used to measure fair value:

Level 1 Valuations for assets and liabilities traded in active exchange markets, such as the New York Stock Exchange. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2 Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third party pricing services for identical or comparable assets or liabilities which use observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in active markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Following is a description of the inputs and valuation methodologies used for assets measured at fair value on a recurring basis and recognized in the accompanying balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy.

Available-for-Sale Securities. The fair value of available-for-sale securities is determined by various valuation methodologies. Where quoted market prices are available in an active market, securities are classified within Level 1. If quoted market prices are not available, then fair values are estimated by using quoted prices of securities with similar characteristics or independent asset pricing services and pricing models, the inputs of which are market-based or independent sources of market parameters, including but not limited to, yield curves, interest rates, volatilities, prepayments, defaults, cumulative loss projections and cash flows. Such securities are classified in Level 2 of the valuation hierarchy. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.

Fair value determinations for Level 3 measurements of securities are the responsibility of the Treasury function of the Company. The Company contracts with a pricing specialist to generate fair value estimates on a monthly basis. The Treasury function of the Company challenges the reasonableness of the assumptions used and reviews the methodology to ensure the estimated fair value complies with accounting standards generally accepted in the United States, analyzes the changes in fair value and compares these changes to internally developed expectations and monitors these changes for appropriateness.

Loans Held for Sale. The fair value of loans held for sale is based on independent asset pricing services which use observable market data as of the measurement date and are therefore classified in Level 2 of the valuation hierarchy.

Derivatives. The fair value of derivatives is based on models using observable market data as of the measurement date and are therefore classified in Level 2 of the valuation hierarchy.

The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall as of March 31, 2024 and December 31, 2023 (in thousands):


	Fair Value Measurements Using
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
March 31, 2024
Available-for-sale securities:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	207,320	$	—	$	207,320	$	—
Obligations of states and political subdivisions		282,570		—		282,570		—
Mortgage-backed securities		581,004		—		581,004		—
Other securities		68,533		—		62,568		5,965
Total available-for-sale securities		1,139,427		—		1,133,462		5,965
Equity securities		4,298		4,298		—		—
Loans held for sale		4,817		—		4,817		—
Derivative assets: interest rate swaps		3,539		—		3,539		—
Total assets	$	1,152,081	$	4,298	$	1,141,818	$	5,965

Derivative liabilities: interest rate swaps	$	2,435	$	—	$	2,435	$	—
December 31, 2023
Available-for-sale securities:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	211,656	$	—	$	211,656	$	—
Obligations of states and political subdivisions		288,616		—		288,616		—
Mortgage-backed securities		602,300		—		602,300		—
Other securities		69,000		—		62,837		6,163
Total available-for-sale securities		1,171,572		—		1,165,409		6,163
Equity securities		4,074		4,074		—		—
Loans held for sale		4,980		—		4,980		—
Derivative assets: interest rate swaps		3,166		—		3,166		—
Total assets	$	1,183,792	$	4,074	$	1,173,555	$	6,163

Derivative liabilities: interest swaps	$	2,217	$	—	$	2,217	$	—

The change in fair value of assets measured on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2024 and 2023 is summarized as follows (in thousands):


	Three months ended March 31, 2024
	Other			Total
Beginning balance	$	6,163		$	6,163
Transfers into Level 3		1			1
Maturities		(199	)		(199	)
Ending balance	$	5,965		$	5,965

	Three months ended March 31, 2023
	Other			Total
Beginning balance	$	10,000		$	10,000
Transfers into Level 3		10			10
Ending balance	$	10,010		$	10,010

Following is a description of the valuation methodologies used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy.

Collateral Dependent Loans. Loans for which it is probable that the Company will not collect all principal and interest due according to contractual terms are measured for impairment. Allowable methods for determining the amount of impairment and estimating fair value include using the fair value of the collateral for collateral dependent loans.

If the impaired loan is identified as collateral dependent, then the fair value method of measuring the amount of impairment is utilized. This method requires obtaining a current independent appraisal of the collateral and applying a discount factor to the value, which includes selling costs. Individually evaluated loans that are collateral dependent are classified within Level 3 of the fair value hierarchy when impairment is determined using the fair value method.

Management establishes a specific allowance for individually evaluated loans that have an estimated fair value that is below the carrying value. The total carrying amount of loans for which a change in specific allowance has occurred as of March 31, 2024 was $1.3 million and a fair value of $1.0 million resulting in specific loss exposures of $324,000.

When there is little prospect of collecting principal or interest, loans, or portions of loans, may be charged-off to the allowance for credit losses. Losses are recognized in the period an obligation becomes uncollectible. The recognition of a loss does not mean that the loan has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off the loan even though partial recovery may be affected in the future.

Foreclosed Assets Held For Sale. Other real estate owned acquired through loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. The adjustment at the time of foreclosure is recorded through the allowance for credit losses. Due to the subjective nature of establishing the fair value when the asset is acquired, the actual fair value of the other real estate owned, or foreclosed asset could differ from the original estimate. If it is determined that fair value declines subsequent to foreclosure, a valuation allowance is recorded through noninterest expense. Operating costs associated with the assets after acquisition are also recorded as noninterest expense. Gains and losses on the disposition of other real estate owned and foreclosed assets are netted and posted to other noninterest expense. The total carrying amount of other real estate owned as of March 31, 2024 was $1.3 million. Other real estate owned included in the total carrying amount and measured at fair value on a nonrecurring basis during the period amounted to $0.

The following table presents the fair value measurement of assets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at March 31, 2024 and December 31, 2023 (in thousands):


	Fair Value Measurements Using
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
March 31, 2024
Collateral dependent loans	$	985	$	—	$	—	$	985
Foreclosed assets held for sale		—		—		—		—
December 31, 2023
Collateral dependent loans	$	1,028	$	—	$	—	$	1,028
Foreclosed assets held for sale		24		—		—		24

Sensitivity of Significant Unobservable Inputs

The following table presents quantitative information about unobservable inputs used in Level 3 fair value measurements other than goodwill at March 31, 2024 and December 31, 2023.

        March 31, 2024

        Fair Value

        Valuation
Technique

        Unobservable Inputs

        Range

        Weighted Average

Collateral dependent loans

985

Third party
valuations

Discount to reflect realizable value less estimated selling costs

0% - 40%

20%

Foreclosed assets held for sale

—

Third party
valuations

Discount to reflect realizable value less estimated selling costs

0% - 40%

35%

        December 31, 2023

        Fair Value

        Valuation
Technique

        Unobservable Inputs

        Range

        Weighted Average

Collateral dependent loans

1,028

Third party
valuations

Discount to reflect realizable value

0% - 40%

20%

Foreclosed assets held for sale

24

Third party
valuations

Discount to reflect realizable value less estimated selling costs

0% - 40%

35%

The following tables present estimated fair values of the Company’s financial instruments at March 31, 2024 and December 31, 2023 in accordance with ASC 825 (in thousands):


	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
March 31, 2024
Financial assets
Cash and due from banks	$	355,686	$	355,686	$	355,686	$	—	$	—
Federal funds sold		15		15		15		—		—
Certificates of deposit investments		3,745		3,745		—		3,745		—
Available-for-sale securities		1,139,427		1,139,427		—		1,133,462		5,965
Held-to-maturity securities		2,282		2,282		2,282		—		—
Equity securities		4,298		4,298		4,298		—		—
Loans held for sale		4,817		4,817		—		4,817		—
Loans net of allowance for credit losses		5,426,542		5,061,373		—		—		5,061,373
Interest receivable		37,667		37,667		—		37,667		—
Federal Reserve Bank stock		19,855		19,855		—		19,855		—
Federal Home Loan Bank stock		8,740		8,740		—		8,740		—
Financial liabilities
Deposits	$	6,242,936	$	6,165,836	$	—	$	5,235,110	$	930,726
Securities sold under agreements to repurchase		210,719		210,719		—		210,719		—
Interest payable		6,318		6,318		—		6,318		—
Federal Home Loan Bank borrowings		238,761		234,678		—		234,678		—
Subordinated debt, net		106,862		102,398		—		102,398		—
Junior subordinated debentures, net		24,113		21,408		—		21,408		—

December 31, 2023
Financial assets
Cash and due from banks	$	134,082	$	134,082	$	134,082	$	—	$	—
Federal funds sold		8,982		8,982		8,982		—		—
Certificates of deposit investments		1,470		1,470		—		1,470		—
Available-for-sale securities		1,171,572		1,171,572		—		1,165,409		6,163
Held-to-maturity securities		2,286		2,286		2,286		—		—
Equity securities		4,074		4,074		4,074		—		—
Loans held for sale		4,980		4,980		—		4,980		—
Loans net of allowance for credit losses		5,506,910		5,235,525		—		—		5,235,525
Interest receivable		35,082		35,082		—		35,082		—
Federal Reserve Bank stock		19,855		19,855		—		19,855		—
Federal Home Loan Bank stock		9,758		9,758		—		9,758		—
Financial liabilities
Deposits	$	6,123,659	$	6,042,277	$	—	$	5,076,066	$	966,211
Securities sold under agreements to repurchase		213,721		213,714		—		213,714		—
Interest payable		5,437		5,437		—		5,437		—
Federal Home Loan Bank borrowings		263,787		261,206		—		261,206		—
Subordinated debentures		106,755		102,018		—		102,018		—
Junior subordinated debentures		24,058		21,524		—		21,524		—

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis is intended to provide a better understanding of the consolidated financial condition and results of operations of the Company and its subsidiaries as of, and for the three months ended March 31, 2024 and 2023. This discussion and analysis should be read in conjunction with the consolidated financial statements, related notes and selected financial data appearing elsewhere in this report.

This document may contain certain forward-looking statements about First Mid, such as discussions of First Mid’s pricing and fee

trends, credit quality and outlook, liquidity, new business results, expansion plans, anticipated expenses and planned schedules. First Mid intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of First Mid, are identified by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,” or similar expressions. Actual results could differ materially from the results indicated by these statements because the realization of those results is subject to many risks and uncertainties, including, among other things, the possibility that any of the anticipated benefits of the merger between First Mid and Blackhawk will not be realized or will not be realized within the expected time period; 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. 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.

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 which have an impact on the Company’s financial condition and results of operations you should carefully read this entire document.

Net income was $20.5 million and $19.2 million for the three months ended March 31, 2024 and 2023, respectively. Diluted net income per common share was $0.86 and $0.93 for the three months ended March 31, 2024 and 2023, respectively.

The following table shows the Company’s annualized performance ratios for three months ended March 31, 2024 and 2023, compared to the performance ratios for the year ended December 31, 2023:

Total assets were $7.7 billion at March 31, 2024, compared to $7.6 billion as of December 31, 2023. From December 31, 2023 to March 31, 2024, cash and cash equivalents increased $212.6 million, net loan balances decreased $80.4 million and investment securities decreased $31.9 million. Net loan balances were $5.43 billion at March 31, 2024 compared to $5.51 billion at December 31, 2023.

Net interest margin, on a tax equivalent basis, defined as net interest income divided by average interest-earning assets, was 3.25% for the three months ended March 31, 2024, up from 2.94% for the same period in 2023. This increase was primarily due to an increase in earning asset yields partially offset by increased rates on interest-bearing deposits and borrowings. Net interest income before the provision for loan losses was $55.5 million compared to net interest income of $43.2 million for the same period in 2023. The increase in net interest income was primarily due to the acquisition of Blackhawk Bank during the third quarter of 2023 and increased net interest margin as mentioned above.

Total non-interest income of $24.5 million increased $2.0 million or 8.9% from $22.5 million for the same period last year. The increase in non-interest income resulted primarily from an increase in insurance commissions and income from Blackhawk Bank partially offset by a decrease in wealth management revenues and bank owned life insurance income.

Total non-interest expense of $53.4 million increase $11.8 million or 28.3% from $41.6 million for the same period last year. The increase was primarily due to the acquisition of Blackhawk Bank and the related amortization of intangibles and increased size of the bank.

Following is a summary of the factors that contributed to the changes in net income (in thousands):

Credit quality is an area of importance to the Company. Total nonperforming loans were $20.1 million at March 31, 2024, compared to $15.2 million at March 31, 2023 and $20.1 million at December 31, 2023. See the discussion under the heading “Loan Quality and Allowance for Loan Losses” for a detailed explanation of these balances. Repossessed asset balances totaled $1.4 million at March 31, 2024 compared to $4.1 million at March 31, 2023 and $1.2 million at December 31, 2023.

The Company’s provision for credit losses for the three months ended March 31, 2024 and 2023 was ($357,000) and ($817,000), respectively. Total loans past due 30 days or more were 0.32% of loans at March 31, 2024 compared to 0.21% at March 31, 2023, and 0.26% of loans at December 31, 2023. Loans secured by both commercial and residential real estate comprised approximately 69.3% of the loan portfolio as of March 31, 2024 and 68.9% as of December 31, 2023.

The Company’s capital position remains strong, and the Company has consistently maintained regulatory capital ratios above the “well-capitalized” standards. The Company’s Tier 1 capital to risk weighted assets ratio calculated under the regulatory risk-based capital requirements at March 31, 2024 and 2023 and December 31, 2023 was 12.46%, 12.88% and 12.02%, respectively. The Company’s total capital to risk weighted assets ratio calculated under the regulatory risk-based capital requirements at March 31, 2024 and 2023, and December 31, 2023 was 15.35%, 15.74% and 14.84%, respectively. The increase in Tier 1 capital and total to risk weighted assets ratio from December 31, 2023 was primarily due to net income for the period increasing equity and a decrease in risk weighted assets related to loans and other assets.

On March 27, 2020, the federal banking regulatory agencies, issued an interim final rule which provided an option to delay the estimated impact on regulatory capital of ASU 2016-13, which was effective January 1, 2020. The initial impact of adoption of ASU 2016-13, as well as 25% of the quarterly increases in the allowance for credit losses subsequent to adoption of ASU 2016-13 ("CECL adjustments"), was be delayed for two years. The cumulative amount of these adjustments is being phased out of the regulatory capital calculation over a three-year period, with 75% of the adjustments included in 2022, 50% of the adjustments included in 2023 and 25% of the adjustments included in 2024. After five years, the temporary delay of ASU 2016-13 adoption will be fully reversed. The Company has elected this option.

The Company’s liquidity position remains sufficient to fund operations and meet the requirements of borrowers, depositors, and creditors. The Company maintains various sources of liquidity to fund its cash needs. See the discussion under the heading “Liquidity” for a full listing of sources and anticipated significant contractual obligations.

The Company enters into financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include lines of credit, letters of credit and other commitments to extend credit. The total outstanding commitments at March 31, 2024 and 2023, were $1.3 billion and $1.2 billion, respectively.

Federal Deposit Insurance Corporation Insurance Coverage. As FDIC-insured institutions, First Mid Bank is required to pay deposit insurance premium assessments to the FDIC. Several requirements with respect to the FDIC insurance system have affected results, including insurance assessment rates.

The Company expensed $869,000 and $463,000 for the assessment during the first three months of 2024 and 2023, respectively.

The Company has established various accounting policies that govern the application of U.S. generally accepted accounting principles in the preparation of the Company’s consolidated financial statements. The significant accounting policies of the Company are described in the footnotes to the consolidated financial statements included in the Company’s 2023 Annual Report on Form 10-K. Certain accounting policies involve significant judgments and assumptions by management that have a material impact on the carrying value of certain assets and liabilities; management considers such accounting policies to be critical accounting policies. The

judgments and assumptions used by management are based on historical experience and other factors, which are believed to be reasonable under the circumstances. Because of the nature of the judgments and assumptions made by management, actual results could differ from these judgments and assumptions, which could have a material impact on the carrying values of assets and liabilities and the results of operations of the Company.

Investment in Debt and Equity Securities. The Company classifies its investments in debt and equity securities as either held-to-maturity or available-for-sale in accordance with Statement of Financial Accounting Standards (SFAS) No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” which was codified into ASC 320. Securities classified as held-to-maturity are recorded at amortized cost. Available-for-sale securities are carried at fair value. Fair value calculations are based on quoted market prices when such prices are available. If quoted market prices are not available, estimates of fair value are computed using a variety of techniques, including extrapolation from the quoted prices of similar instruments or recent trades for thinly traded securities, fundamental analysis, or through obtaining purchase quotes. Due to the subjective nature of the valuation process, it is possible that the actual fair values of these investments could differ from the estimated amounts, thereby affecting the financial position, results of operations and cash flows of the Company.

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 such an event or change has occurred and the Company determines that the impairment is other-than-temporary, a further determination is made as to the portion of impairment that is related to credit loss. The impairment of the investment that is related to the credit loss is expensed in the period in which the event or change occurred. The remainder of the impairment is recorded in other comprehensive income (loss).

Loans. Loans are reported at amortized cost. Amortized cost is the principal balance outstanding, net of purchase discounts and premiums, fair value hedge accounting adjustments and deferred loan fees and costs. Accrued interest is reported separately and is included in interest receivable in the consolidated balance sheets.

Allowance for Credit Losses - Loans. The Company believes the allowance for credit losses for loans is the critical accounting policy that requires the most significant judgments and assumptions used in the preparation of its consolidated financial statements. The allowance for credit losses for loans represents the best estimate of losses inherent in the existing loan portfolio. An estimate of potential losses inherent in the loan portfolio are determined and an allowance for those losses is established by considering factors including historical loss rates, expected cash flows and estimated collateral values. In assessing these factors, the Company uses relevant available information, from internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts.

The Company estimates the appropriate level of allowance for credit losses for individually evaluated loans by evaluating them separately. A specific allowance is assigned to an impaired loan when expected cash flows or collateral are less than the carrying amount of the loan.

Allowance for Credit Losses - Off-Balance Sheet Credit Exposures. The Company estimates expected credit losses over the contractual period that the Company is exposed to credit risk via a contractual obligation to extend credit, unless the obligation is unconditionally cancellable by the Company. The allowance for credit losses on off-balance sheet credit exposures is included in other liabilities in the consolidated balance sheets.

Other Real Estate Owned. Other real estate owned acquired through loan foreclosure is initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. The adjustment at the time of foreclosure is recorded through the allowance for loan losses. Due to the subjective nature of establishing the fair value when the asset is acquired, the actual fair value of the other real estate owned or foreclosed asset could differ from the original estimate. If it is determined that fair value temporarily declines subsequent to foreclosure, a valuation allowance is recorded through noninterest expense.

Operating costs associated with the assets after acquisition are also recorded as noninterest expense. Gains and losses on the disposition of other real estate owned and foreclosed assets are netted and posted to other noninterest expense.

Mortgage Servicing Rights. The Company has elected to record mortgage servicing rights under the amortization method. Using this method, servicing rights are amortized in proportion to and over the period of estimated net servicing income. The amortized assets are assessed for impairment based on fair value at each reporting date. Impairment is determined by stratifying rights into tranches based on predominant characteristics, such as interest rate, loan type and investor type.

Impairment is recognized through a valuation reserve, to the extent that fair value is less than the carrying amount of the servicing assets. Fair value in excess of the carrying amount of servicing assets is not recognized.

Deferred Income Tax Assets/Liabilities. The Company’s net deferred income tax asset arises from differences in the dates that items of income and expense enter our reported income and taxable income. Deferred tax assets and liabilities are established for these items as they arise. From an accounting standpoint, deferred tax assets are reviewed to determine if they are realizable based on the historical level of taxable income, estimates of future taxable income and the reversals of deferred tax liabilities. In most cases, the realization of the deferred tax asset is based on future profitability. If the Company were to experience net operating losses for tax purposes in a future period, the realization of deferred tax assets would be evaluated for a potential valuation reserve.

Additionally, the Company reviews its uncertain tax positions annually under FASB Interpretation No. 48 (FIN No. 48), “Accounting for Uncertainty in Income Taxes,” codified within ASC 740. An uncertain tax position is recognized as a benefit only if it is "more likely than not" that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely to be recognized on examination. For tax positions not meeting the "more likely than not" test, no tax benefit is recorded. A significant amount of judgment is applied to determine both whether the tax position meets the "more likely than not" test as well as to determine the largest amount of tax benefit that is greater than 50% likely to be recognized. Differences between the position taken by management and that of taxing authorities could result in a reduction of a tax benefit or increase to tax liability, which could adversely affect future income tax expense.

Impairment of Goodwill and Intangible Assets. Core deposit and customer relationships, which are intangible assets with a finite life, are recorded on the Company’s consolidated balance sheets. These intangible assets were capitalized as a result of past acquisitions and are being amortized over their estimated useful lives of up to 15 years. 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 as of May 31, 2023 as part of the goodwill impairment test and no impairment was identified.

As a result of the Company’s acquisition activity, goodwill, an intangible asset with an indefinite life, is reflected on the consolidated 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. The fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The Company estimates the fair value of a financial instrument using a variety of valuation methods. Where financial instruments are actively traded and have quoted market prices, quoted market prices are used for fair value. When the financial instruments are not actively traded, other observable market inputs, such as quoted prices of securities with similar characteristics, may be used, if available, to determine fair value. When observable market prices do not exist, the Company estimates fair value. The Company’s valuation methods consider factors such as liquidity and concentration concerns. Other factors such as model assumptions, market dislocations, and unexpected correlations can affect estimates of fair value. Imprecision in estimating these factors can impact the amount of revenue or loss recorded.

SFAS No. 157, “Fair Value Measurements”, which was codified into ASC 820, establishes a framework for measuring the fair value of financial instruments that considers the attributes specific to particular assets or liabilities and establishes a three-level hierarchy for determining fair value based on the transparency of inputs to each valuation as of the fair value measurement date.

At the end of each quarter, the Company assesses the valuation hierarchy for each asset or liability measured. From time to time, assets or liabilities may be transferred within hierarchy levels due to changes in availability of observable market inputs to measure fair value at the measurement date. Transfers into or out of hierarchy levels are based upon the fair value at the beginning of the reporting period. A more detailed description of the fair values measured at each level of the fair value hierarchy can be found in Note 7 – Fair Value of Assets and Liabilities.

The largest source of revenue for the Company is net interest income. Net interest income represents the difference between total interest income earned on earning assets and total interest expense paid on interest-bearing liabilities. The amount of interest income is dependent upon many factors, including the volume and mix of earning assets, the general level of interest rates and the dynamics of changes in interest rates. The cost of funds necessary to support earning assets varies with the volume and mix of interest-bearing liabilities and the rates paid to attract and retain such funds.

Net interest income is the excess of interest received from earning assets over interest paid on interest-bearing liabilities. For analytical purposes, net interest income is presented on a full tax equivalent ("TE") basis in the table that follows. The federal statutory rate in effect of 21% for 2024 and 2023 was used. The TE analysis portrays the income tax benefits associated with the tax-exempt assets. The year-to-date net yield on interest-earning assets excluding the TE adjustments of $616,000 and $755,000 for 2024 and 2023, respectively were 3.20% and 2.89% at March 31, 2024 and 2023, respectively.

The Company’s average balances, fully tax equivalent interest income and interest expense, and rates earned or paid for major balance sheet categories are set forth for the three months ended March 31, 2024 and 2023 in the following table (dollars in thousands):

Changes in net interest income may also be analyzed by segregating the volume and rate components of interest income and interest expense. The following table summarizes the approximate relative contribution of changes in average volume and interest rates to changes in net interest income for the three months ended March 31, 2024, compared to the same period in 2023 (in thousands):

Tax equivalent net interest income increased $12.1 million, or 27.6%, to $56.1 million for the three months ended March 31, 2024, from $43.9 million for the same period in 2023. Net interest income and net interest margin increased primarily due to an increase in earning asset yields partially offset by the increase in deposit and borrowing rates.

For the three months ended March 31, 2024, average earning assets increased $832.6 million, or 13.8%, and average interest-bearing liabilities increased $697.1 million or 14.7% compared with average balances for the same period in 2023.

The provision for credit losses for the three months ended March 31, 2024 and 2023 was ($357,000) and ($817,000), respectively. Net charge offs were $382,000 for the three months ended March 31, 2024, compared to net charge offs of $53,000 for March 31, 2023. Nonperforming loans were $20.1 million and $15.2 million as of March 31, 2024 and 2023, respectively. For information on loan loss experience and nonperforming loans, see discussion under the “Nonperforming Loans” and “Loan Quality and Allowance for Loan Losses” sections below.

An important source of the Company’s revenue is other income. The following table sets forth the major components of other income for the three months ended March 31, 2024 and 2023 (in thousands):

Following are explanations of the changes in these other income categories for the three months ended March 31, 2024 compared to the same period in 2023:

First Mid Bank generally releases the servicing rights on loans sold into the secondary market.

The following table sets forth the major components of other expense for the three months ended March 31, 2024 and 2023 (dollars in thousands):

Following are explanations for the changes in these other expense categories for the three months ended March 31, 2024 compared to the same period in 2023:

Total income tax expense amounted to $6.4 million (23.9% effective tax rate) for the three months ended March 31, 2024, compared to $5.7 million (23.0% effective tax rate) for the same period in 2023. The increase in effective rate is related to a decrease in investment tax credits while pre-tax net income increased.

The Company files U.S. federal and state of Florida, Illinois, Indiana, Missouri, Texas, and Wisconsin income tax returns. The Company is no longer subject to U.S. federal or state income tax examinations by tax authorities for years before 2020.

The Company’s overall investment objectives are to insulate the investment portfolio from undue credit risk, maintain adequate liquidity, insulate capital against changes in market value and control excessive changes in earnings while optimizing investment performance. The types and maturities of securities purchased are primarily based on the Company’s current and projected liquidity and interest rate sensitivity positions. The following table sets forth the amortized cost of the available-for-sale and held-to-maturity securities as of March 31, 2024 and December 31, 2023 (dollars in thousands)

At March 31, 2024, the Company’s investment portfolio decreased by $21.1 million from December 31, 2023 primarily due to paydowns, calls and maturities of various securities. When purchasing investment securities, the Company considers its overall liquidity and interest rate risk profile, as well as the adequacy of expected returns relative to the risks assumed. The table below presents the credit ratings as of March 31, 2024 for investment securities (in thousands):

The loan portfolio is the largest category of the Company’s earning assets. The following table summarizes the composition of the loan portfolio at amortized cost, including loans held for sale, as of March 31, 2024 and December 31, 2023 (in thousands):

Loan balances decreased $81.3 million, or (1.5%). The decrease was primarily due to seasonal pay downs in commercial and industrial loans as well as loan demand partially offset by an increase in agricultural loans due to seasonal demands. The balance of real estate loans held for sale, included in the balances shown above, amounted to $4.8 million and $5.0 million as of March 31, 2024 and December 31, 2023, respectively.

Commercial and commercial real estate loans generally involve higher credit risks than residential real estate and consumer loans. Because payments on loans secured by commercial real estate or equipment are often dependent upon the successful operation and management of the underlying assets, repayment of such loans may be influenced to a great extent by conditions in the market or the economy. The Company does not have any sub-prime mortgages or credit card loans outstanding which are also generally considered to be higher credit risk.

Loans are geographically dispersed throughout Illinois, the St. Louis Metro area, central Missouri, Texas, and southern Wisconsin. While these regions have experienced some economic stress during 2024 and 2023, the Company does not consider these locations high risk areas since these regions have not experienced the significant changes in real estate values seen in some other areas in the United States.

The Company does not have a concentration, as defined by the regulatory agencies, in construction and land development loans or commercial real estate loans as a percentage of total risk-based capital for the periods shown above. At March 31, 2024 and December 31, 2023, the Company did have industry loan concentrations that exceeded 25% of total risk-based capital in the following industries (dollars in thousands):

The Company had no further industry loan concentrations in excess of 25% of total risk-based capital.

The following table presents the balance of loans outstanding as of March 31, 2024, by contractual maturities (in thousands):

As of March 31, 2024, loans with maturities over one year consisted of approximately $3.0 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. The Company has no general policy regarding renewals and borrower requests, which are handled on a case-by-case basis.

Nonperforming loans include: (a) loans accounted for on a nonaccrual basis; (b) accruing loans contractually past due ninety days or more as to interest or principal payments; and (c) loans not included in (a) and (b) above which are defined as “modified”. Repossessed assets include primarily repossessed real estate and automobiles.

The Company’s policy is to discontinue the accrual of interest income on any loan for which principal or interest is ninety days past due. The accrual of interest is discontinued earlier when, in the opinion of management, there is reasonable doubt as to the timely collection of interest or principal. Once interest accruals are discontinued, accrued but uncollected interest is charged against current year income. Subsequent receipts on non-accrual loans are recorded as a reduction of principal, and interest income is recorded only after principal recovery is reasonably assured. Nonaccrual loans are returned to accrual status when, in the opinion of management, the financial position of the borrower indicates there is no longer any reasonable doubt as to the timely collection of interest or principal.

Restructured loans are loans on which, due to deterioration in the borrower’s financial condition, the original terms have been modified in favor of the borrower or either principal or interest has been forgiven. Repossessed assets represent property acquired as the result of borrower defaults on loans. These assets are recorded at estimated fair value, less estimated selling costs, at the time of foreclosure or repossession. Write-downs occurring at foreclosure are charged against the allowance for loan losses. On an ongoing basis, properties are appraised as required by market indications and applicable regulations. Write-downs for subsequent declines in value are recorded in non-interest expense in other real estate owned along with other expenses related to maintaining the properties.

The following table presents information concerning the aggregate amount of nonperforming loans and repossessed assets at March 31, 2024 and December 31, 2023 (dollars in thousands):

The $39,000 decrease in nonaccrual loans during 2024 resulted from the net of $2.2 million of loans put on nonaccrual status offset by $1.7 million of loans becoming current or paid-off, $183,000 of loans transferred to other real estate and $402,000 of loans charged off. The following table summarizes the composition of nonaccrual loans (dollars in thousands):

Interest income that would have been reported if nonaccrual and restructured loans had been performing totaled $267,000 and $79,000 for the three months ended March 31, 2024 and 2023, respectively.

The $243,000 increase in repossessed assets during the 2024 resulted from $243,000 of additional assets repossessed and no repossessed assets sold, no writedowns, and no change in fair value premiums and discounts. The following table summarizes the composition of repossessed assets (dollars in thousands):

Repossessed assets sold during the first three months of 2024 resulted in no net gain or loss of related to real estate asset sales and net gains of $70,000 related to other asset sales. The Company also recognized no deferred losses and recorded no writedowns on real estate properties owned. Repossessed assets sold during the same period in 2023 resulted in net gains of $97,000 related to real estate asset sales and net losses of $17,000 related to other asset sales. The Company also recognized no deferred losses and recorded $151,000 of writedowns on real estate properties owned.

The allowance for credit losses represents management’s estimate of the reserve necessary to adequately account for probable losses existing in the current portfolio. The provision for loan losses is the charge against current earnings that is determined by management as the amount needed to maintain an adequate allowance for loan losses. In determining the adequacy of the allowance for loan losses, and therefore the provision to be charged to current earnings, management relies predominantly on a disciplined credit review and approval process that extends to the full range of the Company’s credit exposure. The review process is directed by overall lending policy and is intended to identify, at the earliest possible stage, borrowers who might be facing financial difficulty. Factors considered by management in evaluating the overall adequacy of the allowance include a migration analysis of the historical net loan losses by loan segment, the level and composition of nonaccrual, past due and renegotiated loans, trends in volumes and terms of loans, effects of changes in risk selection and underwriting standards or lending practices, lending staff changes, concentrations of credit, industry conditions and the current economic conditions in the region where the Company operates.

Management reviews economic factors including the potential for reduced cash flow for commercial operating loans from reduction in sales or increased operating costs, decreased occupancy rates for commercial buildings, reduced levels of home sales for commercial land developments, the uncertainty regarding grain prices, increased operating costs for farmers, and increased levels of unemployment and bankruptcy impacting consumer’s ability to pay. Each of these economic uncertainties was taken into consideration in developing the level of the reserve. Management considers the allowance for loan losses a critical accounting policy.

Management recognizes there are risk factors that are inherent in the Company’s loan portfolio. All financial institutions face risk factors in their loan portfolios because risk exposure is a function of the business. 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 March 31, 2024, the Company’s loan

portfolio included $602.9 million of loans to borrowers whose businesses are directly related to agriculture. Of this amount, $488.5 million was concentrated in other grain farming. Total loans to borrowers whose businesses are directly related to agriculture increased $14.4 million from $588.5 million at December 31, 2023 while loans concentrated in other grain farming increased $16.0 million from $472.5 million at December 31, 2023. 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. The Company also has $1.06 billion of loans to lessors of non-residential buildings, and $549.3 million of loans to lessors of residential buildings and dwellings.

The structure of the Company’s loan approval process is based on progressively larger lending authorities granted to individual loan officers, loan committees, and ultimately the Board of Directors. Outstanding balances to one borrower or affiliated borrowers are limited by federal regulation; however, limits well below the regulatory thresholds are generally observed. Most of the Company’s loans are to businesses located in the geographic market areas served by the Company’s branch bank system. Additionally, a significant portion of the collateral securing the loans in the portfolio is located within the Company’s primary geographic footprint. In general, the Company adheres to loan underwriting standards consistent with industry guidelines for all loan segments.

The Company minimizes credit risk by adhering to sound underwriting and credit review policies. Management and the board of directors of the Company review these policies at least annually. Senior management is actively involved in business development efforts and the maintenance and monitoring of credit underwriting and approval. The loan review system and controls are designed to identify, monitor and address asset quality problems in an accurate and timely manner. The board of directors and management review the status of problem loans each month and formally determine a best estimate of the allowance for loan losses on a quarterly basis. In addition to internal policies and controls, regulatory authorities periodically review asset quality and the overall adequacy of the allowance for loan losses.

Analysis of the allowance for credit losses as of March 31, 2024 and 2023, and of changes in the allowance for the three months ended March 31, 2024 and 2023, is as follows (dollars in thousands):

The decrease in the allowance for credit losses to nonperforming loans ratio is primarily due to an increase in the allowance for credit losses due to acquiring Blackhawk Bank at March 31, 2024 compared to March 31, 2023.

During the first three months of 2024, the Company had net charge offs of $382,000 compared to net charge offs of $53,000 in 2023. During the first three months of 2024, there were one commercial operating loan to one borrower totaling $273,000. During the first three months of 2023, there were no significant charge-offs.

Funding of the Company’s earning assets is substantially provided by a combination of consumer, commercial and public fund deposits. The Company continues to focus its strategies and emphasis on retail core deposits, the major component of funding sources. The following table sets forth the average deposits and weighted average rates for the three months ended March 31, 2024 and 2023 and for the year ended December 31, 2023 (dollars in thousands):

During the first three months of 2024, the average balance of deposits increased by $585.1 million from the average balance for the year ended December 31, 2023. Average non-interest-bearing deposits increased by $55.8 million, average interest-bearing balances increased by $418.4 million, savings account balances increased $44.1 million and balances of time deposits increased $66.9 million. Approximately 99% of the Company’s deposit accounts are less than $250,000. The average account balance for all deposit customers is approximately $25,000.

The following table sets forth the high and low month-end balances for the three months ended March 31, 2024 and 2023 and for the year ended December 31, 2023 (in thousands):

Balances of time deposits, including brokered time deposits of $100,000 or more include time deposits maintained for public fund entities and consumer time deposits. The following table sets forth the maturity of time deposits, including brokered time deposits of $100,000 or more at March 31, 2024 and December 31, 2023 (in thousands):

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 offered as a cash management service to its corporate customers. Other borrowings consist of Federal Home Loan Bank (“FHLB”) advances, federal funds purchased, loans (short-term or long-term debt) that the Company has outstanding and junior subordinated debentures. Information relating to securities sold under agreements to repurchase and other borrowings as of March 31, 2024 and December 31, 2023 is presented below (dollars in thousands):

Securities sold under agreements to repurchase decreased $3.0 million during the first three months of 2024 primarily due to the cash flow needs of various customers. FHLB advances represent borrowings by First Mid Bank to economically fund loan demand. At March 31, 2024 the fixed term advances, consisted of $238.6 million as follows:

The Company is party to a revolving credit agreement with The Northern Trust Company in the amount of $15 million. There was no balance on this line of credit as of March 31, 2024. This loan was renewed on April 5, 2024 for one year as a revolving credit agreement. The interest rate is floating at 2.25% over the federal funds rate. The Company and First Mid Bank, as applicable, were in compliance with the existing covenants at March 31, 2024 and 2023, and December 31, 2023.

On October 6, 2020, the Company issued and sold $96.0 million in aggregate principal amount of its 3.95% Fixed-to-Floating Rate Subordinated Notes due 2030 (the “Notes”). The Notes were issued pursuant to the Indenture, dated as of October 6, 2020 (the “Base Indenture”), between the Company and U.S. Bank National Association, as trustee (the “Trustee”), as supplemented by the First Supplemental Indenture, dated as of October 6, 2020 (the “Supplemental Indenture”), between the Company and the Trustee. The Base Indenture, as amended and supplemented by the Supplemental Indenture, governs the terms of the Notes and provides that the Notes are unsecured, subordinated debt obligations of the Company and will mature on October 15, 2030. From and including the date of issuance to, but excluding October 15, 2025, the Notes will bear interest at an initial rate of 3.95% per annum. From and including October 15, 2025 to, but excluding the maturity date or earlier redemption, the Notes will bear interest at a floating rate equal to three-month Term SOFR plus a spread of 383 basis points, or such other rate as determined pursuant to the Supplemental Indenture, provided that in no event shall the applicable floating interest rate be less than zero per annum.

The Company may, beginning with the interest payment date of October 15, 2025, and on any interest payment date thereafter, redeem the Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of the Notes to be redeemed plus accrued and unpaid interest to but excluding the date of redemption. The Company may also redeem the Notes at any time, including prior to October 15, 2025, at the Company’s option, in whole but not in part, if: (i) a change or prospective change in law occurs that could prevent the Company from deducting interest payable on the Notes for U.S. federal income tax purposes; (ii) a subsequent event occurs that could preclude the Notes from being recognized as Tier 2 capital for regulatory capital purposes; or (iii) the Company is required to register as an investment company under the Investment Company Act of 1940, as amended; in each case, at a redemption price equal to 100% of the principal amount of the Notes plus any accrued and unpaid interest to but excluding the redemption date.

On August 15, 2023, the Company assumed, as part of the Blackhawk Bancorp, Inc. acquisition, $7.5 million principal amount of 3.5% Fixed-to-Floating Rate Subordinated Notes due 2031 (“Blackhawk Subordinated Debt I”). Blackhawk Subordinated Debt I was issued pursuant to Indenture between the Company and UMB Bank, as trustee (the “Trustee”). The Indenture governs the terms of the Notes and provides that the Notes are unsecured, subordinated debt obligations of the Company and will mature on May 14, 2031. From and including the date of issuance to, but excluding May 14, 2026, the Notes will bear interest at an initial rate of 3.5% per annum. From and including May 14, 2026 to, but excluding the maturity date, the Notes will bear interest at a floating rate equal to three-month Term SOFR plus a spread of 285 basis points.

On August 15, 2023, the Company assumed, as part of the Blackhawk Bancorp, Inc. acquisition, $7.5 million principal amount of 3.875% Fixed-to-Floating Rate Subordinated Notes due 2036 (“Blackhawk Subordinated Debt II”). Blackhawk Subordinated Debt II was issued pursuant to Indenture between the Company and UMB Bank, as trustee (the “Trustee”). The Indenture governs the terms of the Notes and provides that the Notes are unsecured, subordinated debt obligations of the Company and will mature on May 14, 2036. From and including the date of issuance to, but excluding May 14, 2031, the Notes will bear interest at an initial rate of 3.875%

per annum. From and including May 14, 2031 to, but excluding the maturity date, the Notes will bear interest at a floating rate equal to three-month Term SOFR plus a spread of 255 basis points.

On April 26, 2006, the Company completed the issuance and sale of $10 million of fixed/floating rate trust preferred securities through First Mid-Illinois Statutory Trust II (“Trust II”), a statutory business trust and wholly owned unconsolidated subsidiary of the Company, as part of a pooled offering. The Company established Trust II for the purpose of issuing the trust preferred securities. The $10 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 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, 7.19% and 7.25% at March 31, 2024 and December 31, 2023, respectively).

On September 8, 2016, the Company assumed the trust preferred securities of Clover Leaf Statutory Trust I (“CLST I”), a statutory business trust that was a wholly owned unconsolidated subsidiary of First Clover Financial. The $4,000,000 of trust preferred securities and an additional $124,000 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 (7.44% and 7.50% at March 31, 2024 and December 31, 2023, respectively) and resets quarterly.

On May 1, 2018, the Company assumed the trust preferred securities of FBTC Statutory Trust I (“FBTCST I”), a statutory business trust that was a wholly owned unconsolidated subsidiary of First BancTrust Corporation. The $6,000,000 of trust preferred securities and an additional $186,000 investment in common equity of FBTCST I is invested in junior subordinated debentures issued to FBTCST I. The subordinated debentures mature in 2035, bear interest at three-month LIBOR plus 170 basis points (7.29% and 7.35% at March 31, 2024 and December 31, 2023, respectively) and resets quarterly.

On August 15, 2023, the Company assumed the trust preferred securities of Blackhawk Statutory Trust I (“BHST I”), a statutory business trust that was a wholly owned unconsolidated subsidiary of Blackhawk Bancorp, Inc. The $1,000,000 of trust preferred securities and an additional $31,000 investment in common equity of BHST I is invested in junior subordinated debentures issued to BHST I. The subordinated debentures mature in 2032, bear interest at three-month LIBOR plus 325 basis points (8.82% and 8.87% at March 31, 2024 and December 31, 2023, respectively) and resets quarterly.

On August 15, 2023, the Company assumed the trust preferred securities of Blackhawk Statutory Trust II (“BHST II”), a statutory business trust that was a wholly owned unconsolidated subsidiary of Blackhawk Bancorp, Inc. The $4,000,000 of trust preferred securities and an additional $124,000 investment in common equity of BHST II is invested in junior subordinated debentures issued to BHST II. The subordinated debentures mature in 2035, bear interest at three-month LIBOR plus 205 basis points (7.64% and 7.69% at March 31, 2024 and December 31, 2023, respectively) and resets quarterly.

The trust preferred securities issued by Trust II, CLST I, FBTCST I, BHST I, and BHST II are included as Tier 1 capital of the Company for regulatory capital purposes. On March 1, 2005, the Federal Reserve Board adopted a final rule that allows the continued limited inclusion of trust preferred securities in the calculation of Tier 1 capital for regulatory purposes. The final rule provided a five-year transition period, ending September 30, 2010, for application of the revised quantitative limits. On March 17, 2009, the Federal Reserve Board adopted an additional final rule that delayed the effective date of the new limits on inclusion of trust preferred securities in the calculation of Tier 1 capital until March 31, 2012. The application of the revised quantitative limits did not and is not expected to have a significant impact on its calculation of Tier 1 capital for regulatory purposes or its classification as well-capitalized. The Dodd-Frank Act, signed into law July 21, 2010, removes trust preferred securities as a permitted component of a holding company’s Tier 1 capital after a three-year phase-in period beginning January 1, 2013 for larger holding companies. For holding companies with less than $15 billion in consolidated assets, existing issues of trust preferred securities are grandfathered and not subject to this new restriction.

Similarly, the final rule implementing the Basel III reforms allows holding companies with less than $15 billion in consolidated assets as of December 31, 2009 to continue to count toward Tier 1 capital any trust preferred securities issued before May 19, 2010. New issuances of trust preferred securities, however, would not count as Tier 1 regulatory capital.

In addition to requirements of the Dodd-Frank Act discussed above, the act also required the federal banking agencies to adopt certain rules that prohibit banks and their affiliates from engaging in proprietary trading and investing in and sponsoring certain unregistered investment companies (defined as hedge funds and private equity funds). This rule is generally referred to as the “Volcker Rule.” The rules permit the retention of an interest in or sponsorship of covered funds by banking entities under $15 billion in assets (such as the Company) if (1) the collateralized debt obligation was established and issued prior to May 19, 2010, (2) the banking entity reasonably believes that the offering proceeds received by the collateralized debt obligation were invested primarily in qualifying trust preferred collateral, and (3) the banking entity’s interests in the collateralized debt obligation was acquired on or prior to December 10, 2013. The Company does not currently anticipate that the Volcker Rule will have a material effect on the

The Company seeks to maximize its net interest margin while maintaining an acceptable level of interest rate risk. Interest rate risk can be defined as the amount of forecasted net interest income that may be gained or lost due to changes in the interest rate environment, a variable over which management has no control. Interest rate risk, or sensitivity, arises when the maturity or repricing characteristics of interest-bearing assets differ significantly from the maturity or repricing characteristics of interest- bearing liabilities. The Company monitors its interest rate sensitivity position to maintain a balance between rate sensitive assets and rate sensitive liabilities. This balance serves to limit the adverse effects of changes in interest rates. The Company’s asset liability management committee (ALCO) oversees the interest rate sensitivity position and directs the overall allocation of funds.

In the banking industry, a traditional way to measure potential net interest income exposure to changes in interest rates is through a technique known as “static GAP” analysis which measures the cumulative differences between the amounts of assets and liabilities maturing or repricing at various intervals. By comparing the volumes of interest-bearing assets and liabilities that have contractual maturities and repricing points at various times in the future, management can gain insight into the amount of interest rate risk embedded in the balance sheet. The following table sets forth the Company’s interest rate repricing GAP for selected maturity periods at March 31, 2024 (dollars in thousands):

The static GAP analysis shows that at March 31, 2024, the Company was liability sensitive, on a cumulative basis, through the twelve-month time horizon. This indicates that future increases in interest rates could have an adverse effect on net interest income. There are several ways the Company measures and manages the exposure to interest rate sensitivity, including static GAP analysis. The Company’s ALCO also uses other financial models to project interest income under various rate scenarios and prepayment/extension assumptions consistent with First Mid Bank’s historical experience and with known industry trends. ALCO meets at least monthly to review the Company’s exposure to interest rate changes as indicated by the various techniques and to make necessary changes in the composition terms and/or rates of the assets and liabilities.

At March 31, 2024, the Company’s stockholders' equity increased $4.7 million or 0.6%, to $798.0 million from $793.2 million as of December 31, 2023. During the first three months of 2024, net income contributed $20.5 million to equity before the payment of dividends to stockholders. The change in market value of available-for-sale investment securities decreased stockholders' equity by $11.2 million, net of tax. Dividends of $5.5 million were paid during the first three months of 2024.

The Company is subject to various regulatory capital requirements administered by the federal banking agencies. Bank holding companies follow minimum regulatory requirements established by the Board of Governors of the Federal Reserve System (“Federal Reserve System”), First Mid Bank follows similar minimum regulatory requirements established for banks by the Office of the Comptroller of the Currency (“OCC”) and the Federal Deposit Insurance Corporation, as applicable. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary action by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Quantitative measures established by regulatory capital standards to

ensure capital adequacy require the Company and its subsidiary bank to maintain minimum capital amounts and ratios (set forth in the table below). Management believes that, as of March 31, 2024 and December 31, 2023, the Company and First Mid Bank, as applicable, met all capital adequacy requirements.

As permitted by the interim final rule issued on March 27, 2020 by the federal banking regulatory agencies, the Company elected the option to delay the estimated impact on regulatory capital of adopting ASU 2016-13, which was effective January 1, 2020. The initial impact of adoption of ASU 2016-13, as well as 25% of the quarterly increases in allowance for credit losses subsequent to adoption of ASU 2016-13 was delayed for two years. After two years, the cumulative amount of these adjustments is being phased out of the regulatory capital calculation over a three-year period, with 75% of the adjustments included in 2022, 50% of the adjustments included in 2023 and 25% of the adjustments included in 2024. After five years, the temporary delay of ASU 2016-13 adoption will be fully reversed.

To be categorized as well-capitalized, total risk-based capital, Tier 1 risk-based capital, common equity Tier 1 risk-based capital and Tier 1 leverage ratios must be maintained as set forth in the following table (dollars in thousands):

The Company's risk-weighted assets, capital, and capital ratios for March 31, 2024 are computed in accordance with Basel III capital rules which were effective January 1, 2015. As of March 31, 2024, the Company and First Mid Bank had capital ratios above the required minimums for regulatory capital adequacy, and First Mid Bank had capital ratios that qualified it for treatment as well-capitalized under the regulatory framework for prompt corrective action with respect to banks.

Participants may purchase Company stock under the following three plans of the Company: The Deferred Compensation Plan, the Dividend Reinvestment Plan, and the Stock Incentive Plan. For more detailed information on these plans, refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

At the Annual Meeting of Stockholders held April 26, 2017, the stockholders approved the 2017 Stock Incentive Plan ("SI Plan"). The SI Plan was implemented to succeed the Company’s 2007 Stock Incentive Plan, which had a ten-year term. The SI Plan is intended to provide a means whereby directors, employees, consultants and advisors of the Company and its Subsidiaries may sustain a sense of proprietorship and personal involvement in the continued development and financial success of the Company and its Subsidiaries, thereby advancing the interests of the Company and its stockholders. Accordingly, directors and selected employees, consultants and advisors may be provided the opportunity to acquire shares of Common Stock of the Company on the terms and conditions established in the SI Plan.

Following the stockholders’ approval at the 2021 annual meeting of the Company, a maximum of 399,983 shares of common stock may be issued under the SI Plan. The Company awarded 53,766 and 60,550 restricted stock awards during 2024 and 2023, respectively and 39,150 and 37,900 as stock unit awards during 2024 and 2023, respectively.

At the Annual Meeting of Stockholders held April 25, 2018, the stockholders approved the First Mid-Illinois Bancshares, Inc. Employee Stock Purchase Plan (“ESPP”). The ESPP is intended to promote the interests of the Company by providing eligible employees with the opportunity to purchase shares of common stock of the Company at a 15% discount through payroll deductions. The ESPP is also 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 March 31, 2024, 102,340 shares have been issued pursuant to the ESPP. During the three months ended March 31, 2024 and 2023, 8,612 shares and 7,963 shares, respectively, were issued pursuant to the ESPP.

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 2024, the Company did not repurchase any shares. The Company has approximately $3.6 million in remaining capacity under its existing repurchase program.

Although the Company adopted the repurchase plan, the Company may make discretionary repurchases in the open market or in privately negotiated transactions from time to time. The timing, manner, price and amount of any such repurchases will be determined by the Company at its discretion and will depend upon a variety of factors including economic and market conditions, price, applicable legal requirements and other factors.

Liquidity represents the ability of the Company and its subsidiaries to meet all present and future financial obligations arising in the daily operations of the business. Financial obligations consist of the need for funds to meet extensions of credit, deposit withdrawals and debt servicing. The Company’s liquidity management focuses on the ability to obtain funds economically through assets that may be converted into cash at minimal costs or through other sources. The Company’s other sources of cash include overnight federal fund lines, Federal Home Loan Bank advances, deposits of the State of Illinois, the ability to borrow at the Federal Reserve Bank of Chicago, and the Company’s operating line of credit with The Northern Trust Company.

Management continues to monitor its expected liquidity requirements carefully, focusing primarily on cash flows from:

The following table summarizes significant contractual obligations and other commitments at March 31, 2024 (in thousands):

For the three months ended March 31, 2024, net cash of $29.0 million was provided by operating activities, $97.4 million was provided by investing activities, and $86.2 million was provided by financing activities. In total, cash and cash equivalents increased by $212.6 million since year-end 2023.

First Mid Bank enters into financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include lines of credit, letters of credit and other commitments to extend credit. Each of these instruments involves, to varying degrees, elements of credit, interest rate and liquidity risk in excess of the amounts recognized in the consolidated balance sheets. The Company uses the same credit policies and requires similar collateral in approving lines of credit and commitments and issuing letters of credit as it does in making loans. The exposure to credit losses on financial instruments is represented by the contractual amount of these instruments. However, the Company does not anticipate any losses from these instruments. The off-balance sheet financial instruments whose contract amounts represent credit risk at March 31, 2024 and December 31, 2023 were as follows (in thousands):

Commitments to originate credit represent approved commercial, residential real estate and home equity loans that generally are expected to be funded within ninety days. Lines of credit are agreements by which the Company agrees to provide a borrowing accommodation up to a stated amount as long as there is no violation of any condition established in the loan agreement. Both commitments to originate credit and lines of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the lines and some commitments are expected to expire without being drawn upon, the total amounts do not necessarily represent future cash requirements.

Standby letters of credit are conditional commitments issued by the Company to guarantee the financial performance of customers to third parties. Standby letters of credit are primarily issued to facilitate trade or support borrowing arrangements and generally expire in one year or less. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending credit facilities to customers. The maximum amount of credit that would be extended under letters of credit is equal to the total off-balance sheet contract amount of such instrument. The Company's deferred revenue under standby letters of credit was nominal.

The Company is also subject to claims and lawsuits that arise primarily in the ordinary course of business. It is the opinion of management that the disposition of ultimate resolution of such claims and lawsuits will not have a material adverse effect on the consolidated financial position, results of operations and cash flows of the Company.

There has been no material change in the market risk faced by the Company since December 31, 2023. For information regarding the Company’s market risk, refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s “disclosure controls and procedures” (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this report. Based on such evaluation, such officers have concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures are effective. Further, there have been no changes in the Company’s internal control over financial reporting during the last fiscal quarter that have materially affected or that are reasonably likely to affect materially the Company’s internal control over financial reporting.

From time to time the Company and its subsidiaries may be involved in litigation that the Company believes is a type common to our industry. None of any such existing claims are believed to be individually material at this time to the Company, although the outcome of any such existing claims cannot be predicted with certainty.

Various risks and uncertainties, some of which are difficult to predict and beyond the Company’s control, could negatively impact the Company. As a financial institution, the Company is exposed to interest rate risk, liquidity risk, credit risk, operational risk, risks from economic or market conditions, and general business risks among others. Adverse experience with these or other risks could have a material impact on the Company’s financial condition and results of operations, as well as the value of its common stock. See the risk factors and “Supervision and Regulation” described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

See heading “Stock Repurchase Program” for more information regarding stock purchases.

None of the Company's directors and officers adopted, modified or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the Company's fiscal quarter ended March 31, 2024 (each as defined in Item 408 of Regulation S-K under the Securities Exchange Act of 1934, as amended).

The exhibits required by Item 601 of Regulation S-K and filed herewith are listed in the Exhibit Index that precedes the Signature Page and the exhibits filed.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Delaware	37-1103704
(State or other jurisdiction of incorporation or organization)	(I.R.S. employer identification no.)


1421 Charleston Avenue
Mattoon, Illinois	61938
(Address of principal executive offices)	(Zip code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	FMBH	NASDAQ Global Market


Large accelerated filer ☐		Accelerated filer ☒
Non-accelerated filer ☐		Smaller reporting company ☐
		Emerging growth company ☐


(In thousands, except share data)	March 31, 2024			December 31, 2023
Assets
Cash and due from banks:
Non-interest bearing	$	81,006		$	122,871
Interest bearing		274,680			11,211
Federal funds sold		15			8,982
Cash and cash equivalents		355,701			143,064
Certificates of deposit		3,745			1,470
Investment securities:
Available-for-sale, at fair value (amortized cost of $1,342,603 and $1,363,721 at March 31, 2024 and December 31, 2023, respectively)		1,139,427			1,171,572
Held-to-maturity, at amortized cost (estimated fair value of $2,282 and $2,286 at March 31, 2024 and December 31, 2023, respectively)		2,282			2,286
Equity securities, at fair value		4,298			4,074
Loans held for sale		4,817			4,980
Loans		5,494,478			5,575,585
Less allowance for credit losses		(67,936	)		(68,675	)
Net loans		5,426,542			5,506,910
Interest receivable		37,667			35,082
Other real estate owned		1,346			1,163
Premises and equipment, net		101,666			101,396
Goodwill, net		196,461			196,461
Intangible assets, net		64,238			67,770
Bank owned life insurance		167,247			166,125
Right of use lease assets		14,318			14,306
Deferred tax asset, net		69,876			70,067
Other assets		88,615			100,068
Total assets	$	7,678,246		$	7,586,794
Liabilities and stockholders’ equity
Deposits:
Non-interest bearing	$	1,448,299		$	1,398,234
Interest bearing		4,794,637			4,725,425
Total deposits		6,242,936			6,123,659
Securities sold under agreements to repurchase		210,719			213,721
Interest payable		6,318			5,437
FHLB borrowings		238,761			263,787
Junior subordinated debentures, net		24,113			24,058
Subordinated debt, net		106,862			106,755
Lease liabilities		14,624			14,615
Other liabilities		35,961			41,558
Total liabilities		6,880,294			6,793,590
Stockholders’ equity:
Common stock ($4 par value; authorized 30,000,000 shares; issued 24,541,500 and 24,479,708 shares in 2024 and 2023, respectively; outstanding 23,888,929 and 23,827,137 shares in 2024 and 2023, respectively)		100,166			99,919
Additional paid-in capital		511,785			509,314
Retained earnings		353,694			338,662
Deferred compensation		832			2,629
Accumulated other comprehensive loss		(147,667	)		(136,427	)
Treasury stock, at cost (652,571 shares in 2024 and 652,571 shares in 2023)		(20,858	)		(20,893	)
Total stockholders’ equity		797,952			793,204
Total liabilities and stockholders’ equity	$	7,678,246		$	7,586,794


	Three months ended
	March 31,
(In thousands, except per share data)	2024			2023
Interest income:
Interest and fees on loans	$	77,823		$	56,236
Interest on investment securities		7,405			7,127
Interest on certificates of deposit investments		20			14
Interest on federal funds sold		17			85
Interest on deposits with other financial institutions		2,407			209
Total interest income		87,672			63,671
Interest expense:
Interest on deposits		26,096			12,767
Interest on securities sold under agreements to repurchase		2,056			1,463
Interest on FHLB borrowings		2,314			4,874
Interest on other borrowings		—			9
Interest on junior subordinated debentures		542			379
Interest on subordinated debentures		1,194			988
Total interest expense		32,202			20,480
Net interest income		55,470			43,191
Provision for credit losses		(357	)		(817	)
Net interest income after provision for credit losses		55,827			44,008
Other income:
Wealth management revenues		5,322			5,514
Insurance commissions		9,213			8,480
Service charges		2,956			2,203
Securities gains (losses), net		—			(46	)
Mortgage banking revenue, net		706			150
ATM / debit card revenue		4,055			3,083
Bank owned life insurance		1,121			1,641
Other		1,105			1,454
Total other income		24,478			22,479
Other expense:
Salaries and employee benefits		30,448			26,071
Net occupancy and equipment expense		7,560			6,005
Net other real estate owned expense		(21	)		133
FDIC insurance		869			463
Amortization of intangible assets		3,497			1,522
Stationery and supplies		391			292
Legal and professional		2,449			1,690
ATM / debit card		1,191			1,223
Marketing and donations		862			654
Other		6,116			3,524
Total other expense		53,362			41,577
Income before income taxes		26,943			24,910
Income taxes		6,440			5,730
Net income	$	20,503		$	19,180
Per share data:
Basic net income per common share	$	0.86		$	0.94
Diluted net income per common share		0.86			0.93
Cash dividends declared per common share		0.23			0.23


	Three months ended
	March 31,
(In thousands)	2024			2023
Net income	$	20,503		$	19,180
Other comprehensive income (loss)
Unrealized gains (losses) on available-for-sale securities, net of tax benefit (expense) of $4,225 and ($5,544) for three months ended March 31, 2024 and 2023, respectively		(11,240	)		13,573
Less: reclassification adjustment for realized gains (losses) included in net income, net of tax benefit (expense) of $0 and ($13) for three months ended March 31, 2024 and 2023, respectively		—			(33	)
Other comprehensive income (loss), net of taxes		(11,240	)		13,606
Comprehensive income	$	9,263		$	32,786


(In thousands)	Common Stock		Additional Paid-In- Capital			Retained Earnings			Deferred Compensation			Accumulated Other Comprehensive Loss			Treasury Stock			Total
December 31, 2023	$	99,919	$	509,314		$	338,662		$	2,629		$	(136,427	)	$	(20,893	)	$	793,204
Net income		—		—			20,503			—			—			—			20,503
Other comprehensive loss, net tax		—		—			—			—			(11,240	)		—			(11,240	)
Cash dividends on common stock (0.23/share)		—		—			(5,471	)		—			—			—			(5,471	)
Issuance of 47,580 restricted shares pursuant to 2017 stock incentive plan, net of forfeitures		191		1,401			—			—			—			—			1,592
Issuance of 5,600 common shares pursuant to 2017 stock incentive plan		22		166			—			—			—			—			188
Issuance of 8,612 common shares pursuant to the employee stock purchase plan		34		160			—			—			—			—			194
Deferred compensation		—		—			—			(2,288	)		—			35			(2,253	)
Grant of restricted units pursuant to 2017 stock incentive plan		—		1,311			—			—			—			—			1,311
Release of restricted units pursuant to 2017 stock incentive plan		—		(617	)		—			—			—			—			(617	)
Vested restricted shares/units compensation expense		—		50			—			491			—			—			541
March 31, 2024	$	100,166	$	511,785		$	353,694		$	832		$	(147,667	)	$	(20,858	)	$	797,952


	Three months ended March 31,
(In thousands)	2024			2023
Cash flows from operating activities:
Net income	$	20,503		$	19,180
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses		(357	)		(817	)
Depreciation, amortization and accretion, net		5,338			3,485
Change in cash surrender value of bank owned life insurance		(1,121	)		(926	)
Change in bank owned life insurance		—			(715	)
Stock-based compensation expense		606			307
Operating lease payments		(836	)		(781	)
Loss on investment securities, net		—			46
(Gain) loss on sales and write downs of other real estate owned, net		(70	)		71
Gain on sale of loans held for sale, net		(233	)		(207	)
Increase in accrued interest receivable		(2,585	)		(372	)
Increase in accrued interest payable		910			1,378
Origination of loans held for sale		(10,448	)		(12,191	)
Proceeds from sale of loans held for sale		10,844			11,737
Decrease in other assets		10,537			1,867
Decrease in other liabilities		(4,040	)		(1,757	)
Net cash provided by operating activities		29,048			20,305
Cash flows from investing activities:
Purchases of certificates of deposit investments		(2,275	)		(245	)
Proceeds from sales of securities available-for-sale		—			6,483
Proceeds from maturities of securities available-for-sale		21,621			19,250
Purchases of securities available-for-sale		(994	)		(1,063	)
Purchase of securities held-to-maturity		—			(25	)
Income increasing amortized cost of HTM securities		(11	)		—
Net decrease in loans		80,542			65,541
Purchases of premises and equipment		(1,480	)		(941	)
Proceeds from sales of other real property owned		—			734
Net cash provided by investing activities		97,403			89,734
Cash flows from financing activities:
Net increase (decrease) in deposits		119,277			(226,223	)
(Decrease) increase in repurchase agreements		(3,002	)		7,250
Proceeds from FHLB advances		—			170,000
Repayment of FHLB advances		(25,000	)		(40,000	)
Proceeds from issuance of common stock		382			336
Purchase of treasury stock		—			(5	)
Dividends paid on common stock		(5,471	)		(4,696	)
Net cash provided by (used in) financing activities		86,186			(93,338	)
Increase in cash and cash equivalents		212,637			16,701
Cash and cash equivalents at beginning of period		143,064			152,433
Cash and cash equivalents at end of period	$	355,701		$	169,134


	Unrealized Losses on Securities
March 31, 2024
Net unrealized losses on securities available-for-sale	$	(203,177	)
Tax benefit		55,510
Balance at March 31, 2024	$	(147,667	)

December 31, 2023
Net unrealized losses on securities available-for-sale	$	(192,149	)
Tax benefit		55,722
Balance at December 31, 2023	$	(136,427	)


	Amounts Reclassified from Other Comprehensive Income (Loss)
		Three months ended
		March 31,
		2024		2023			Affected Line Item in the Statements of Income
Realized gain (loss) on available-for-sale securities		$	—	$	(46	)	Securities (loss) gain, net
Tax effect			—		13		Income taxes
Total reclassifications out of accumulated other comprehensive income (loss)		$	—	$	(33	)	Net reclassified amount


	March 31, 2024				December 31, 2023
	Gross Carrying Value		Accumulated Amortization		Gross Carrying Value		Accumulated Amortization
Goodwill not subject to amortization	$	200,221	$	3,760	$	200,221	$	3,760
Intangibles from branch acquisition		3,015		3,015		3,015		3,015
Core deposit intangibles		79,945		37,520		79,945		34,966
Other intangibles		26,552		11,198		26,552		10,620
	$	309,733	$	55,493	$	309,733	$	52,361


Unallocated purchase price				$	26,955
Less purchase accounting adjustments:
Fair value of securities	$	(25,521	)
Fair value of loans, net		(43,477	)
Fair value of premises and equipment		(3,856	)
Fair value of time deposits		2,311
Fair value of subordinated and jr subordinated debentures		3,707
Increase in core deposit intangible		33,731
Increase in mortgage servicing rights		3,344
Other assets		6,619
					(23,142	)
				$	50,097


Unallocated purchase price				$	10,145
Less purchase accounting adjustments:
Insurance Company intangible	$	5,770
Other liabilities		(1,576	)
					4,194
				$	5,951


Aggregate amortization expense:
For period 01/01/24 - 03/31/24	$	3,497
Estimated amortization expense:
For period 04/01/24 - 12/31/24		9,982
For year ended 12/31/25		12,158
For year ended 12/31/26		10,570
For year ended 12/31/27		9,351
For year ended 12/31/28		8,183


Advance		Term (in years)	Interest Rate	Maturity Date
	25,000,000	1.5	4.69%	May 10, 2024
	25,000,000	2.0	4.59%	November 8, 2024
	10,000,000	5.0	1.45%	December 31, 2024
	5,000,000	5.0	0.91%	March 10, 2025
	3,605,826	10.0	2.64%	December 23, 2025
	25,000,000	3.0	4.40%	June 15, 2026
	50,000,000	4.0	3.49%	December 8, 2027
	25,000,000	5.0	3.67%	June 15, 2028
	25,000,000	5.0	3.82%	June 29, 2028
	25,000,000	5.0	3.95%	June 29, 2028
	5,000,000	10.0	1.15%	October 3, 2029
	5,000,000	10.0	1.12%	October 3, 2029
	10,000,000	10.0	1.39%	December 31, 2029


	March 31, 2024		December 31, 2023
US Treasury securities and obligations of U.S. government corporations and agencies	$	57,872	$	46,544
Mortgage-backed securities: GSE: residential		152,847		167,177
Total	$	210,719	$	213,721


(In thousands, except shares)
Common stock issued (3,290,222 shares)	$	93,508
Cash consideration		2
Purchase price	$	93,510


(In thousands)
Unpaid principal balance	$	115,250
PCD allowance for credit losses at acquisition		(3,791	)
Non-credit discount on acquired loans		(5,476	)
Fair value of PCD loans	$	105,983


Year ending December 31,
2024	$	2,444
2025		2,686
2026		2,509
2027		2,287
2028		1,693
Thereafter		4,818
Total lease payments		16,437
Less imputed interest		(1,813	)
Total lease liability	$	14,624


	March 31, 2024		March 31, 2023
Operating cash flows from operating leases	$	836	$	781


	Balance Sheet Location	Weighted Average Remaining Maturity (Years)	Notional Amount		Estimated Value
March 31, 2024
Fair value hedges:
Interest rate swap agreements	Other liabilities	5.1	$	12,910	$	(2,435	)

December 31, 2023
Fair value hedges:
Interest rate swap agreements	Other liabilities	5.3	$	12,976	$	(2,217	)


		Three months ended
		March 31,
Derivative	Location of Gain (Loss) on Derivatives	2024		2023
Interest rate swap agreements	Interest income on loans	$	155	$	(325	)


Line Item in the Balance Sheet in Which the Hedge Item is Included	Carrying Amount of the Hedged Asset		Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Asset
Loans	$	11,807	$	(1,104	)


	Three months ended						Year ended
	March 31, 2024			March 31, 2023			December 31, 2023
Return on average assets		1.07	%		1.15	%		0.97	%
Return on average common equity		10.37	%		12.11	%		10.10	%
Average equity to average assets		10.35	%		9.47	%		9.61	%


	Change in Net Income
	2024 versus 2023
		Three months ended
		March 31, 2024
Net interest income		$	12,279
Provision for credit losses			(460	)
Other income, including securities transactions			1,999
Other expenses			(11,785	)
Income taxes			(710	)
Increase (decrease) in net income		$	1,323


	Three months ended March 31, 2024								Three months ended March 31, 2023
	Average					Average			Average					Average
	Balance			Interest		Rate			Balance			Interest		Rate
Assets
Interest-bearing deposits with other financial institutions	$	173,365		$	2,407		5.58	%	$	15,688		$	209		5.40	%
Federal funds sold		1,094			17		6.18	%		7,753			85		4.44	%
Certificates of deposit		1,545			20		5.15	%		1,789			14		3.09	%
Investment securities:
Taxable		904,451			5,470		2.42	%		957,951			5,163		2.16	%
Tax-exempt (1)		280,215			2,450		3.50	%		280,828			2,486		3.54	%
Loans net of unearned income (TE) (2)		5,524,185			77,924		5.67	%		4,788,255			56,469		4.78	%
Total earning assets		6,884,855			88,288		5.16	%		6,052,264			64,426		4.32	%
Cash and due from banks		102,922								135,145
Premises and equipment		101,530								90,345
Other assets		624,205								475,022
Allowance for credit losses		(69,059	)							(59,558	)
Total assets	$	7,644,453							$	6,693,218
Liabilities and stockholders' equity
Interest-bearing deposits
Demand deposits	$	3,036,837		$	16,612		2.20	%	$	2,504,073		$	9,655		1.56	%
Savings deposits		707,849			178		0.10	%		640,347			191		0.12	%
Time deposits		1,028,045			9,306		3.64	%		699,328			2,921		1.69	%
Total interest-bearing deposits		4,772,731			26,096		2.20	%		3,843,748			12,767		1.35	%
Securities sold under agreements to repurchase		264,587			2,056		3.13	%		231,012			1,463		2.57	%
FHLB advances		258,554			2,314		3.60	%		540,156			4,874		3.66	%
Federal funds purchased		—			—		—	%		778			9		4.69	%
Subordinated debt		106,791			1,194		4.50	%		94,567			987		4.23	%
Junior subordinated debentures		24,084			542		9.05	%		19,385			379		7.93	%
Total borrowings		654,016			6,106		3.75	%		885,898			7,712		3.53	%
Total interest-bearing liabilities		5,426,747			32,202		2.39	%		4,729,646			20,479		1.76	%
Non interest-bearing demand deposits		1,367,798					1.91	%		1,273,527					1.38	%
Other liabilities		59,056								56,456
Stockholders' equity		790,852								633,589
Total liabilities and equity	$	7,644,453							$	6,693,218
Net interest income				$	56,086							$	43,947
Net interest spread							2.77	%							2.56	%
Impact of non interest-bearing funds							0.48	%							0.38	%
TE net yield on interest-earning assets							3.25	%							2.94	%


	Three months ended March 31, 2024 compared to 2023 Increase / (Decrease)
	Total
	Change			Volume (1)			Rate (1)
Earning assets:
Interest-bearing deposits	$	2,198		$	2,191		$	7
Federal funds sold		(68	)		(232	)		164
Certificates of deposit investments		6			(12	)		18
Investment securities:
Taxable		307			(1,482	)		1,789
Tax-exempt (2)		(36	)		(5	)		(31	)
Loans (2) (3)		21,455			9,702			11,753
Total interest income	$	23,862		$	10,162		$	13,700
Interest-bearing liabilities:
Interest-bearing deposits
Demand deposits	$	6,957		$	2,376		$	4,581
Savings deposits		(13	)		94			(107	)
Time deposits		6,385			1,848			4,537
Securities sold under agreements to repurchase		593			237			356
FHLB advances		(2,560	)		(2,482	)		(78	)
Federal funds purchased		(9	)		(5	)		(4	)
Subordinated debt		207			139			68
Junior subordinated debentures		163			103			60
Total interest expense		11,723			2,310			9,413
Net interest income	$	12,139		$	7,852		$	4,287


					Average Credit Rating of Fair Value at March 31, 2024 (1)
	Amortized Cost		Estimated Fair Value		AAA		AA +/-		A +/-		BBB +/-		< BBB -		Not rated
Available-for-sale:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	234,540	$	207,320	$	202,190	$	1,295	$	1,891	$	—	$	1,944	$	—
Obligations of state and political subdivisions		335,350		282,570		51,208		180,940		47,726		—		—		2,696
Mortgage-backed securities (2)		699,921		581,004		—		—		—		—		—		581,004
Other securities		72,792		68,533		3,351		8,029		20,731		3,896		—		32,526
Total available-for-sale	$	1,342,603	$	1,139,427	$	256,749	$	190,264	$	70,348	$	3,896	$	1,944	$	616,226
Held-to-maturity:
Other securities		2,282		2,282		—		—		—		—		—		2,282
Total held-to-maturity	$	2,282	$	2,282	$	—	$	—	$	—	$	—	$	—	$	2,282
Equity securities:
Federal Agricultural Mtg Corp		85		528		—		—		—		—		—		528
Midwest Independent BankersBank		150		202		—		—		—		—		—		202
Equalize Community Development Fund		3,568		3,568		—		—		—		—		—		3,568
Total equity securities	$	3,803	$	4,298	$	—	$	—	$	—	$	—	$	—	$	4,298


	March 31, 2024					December 31, 2023
	Principal balance		% Outstanding Loans			Principal balance		% Outstanding Loans
Other grain farming	$	488,462		8.88	%	$	472,456		8.47	%
Lessors of non-residential buildings		1,055,105		19.19	%		1,086,152		19.46	%
Lessors of residential buildings and dwellings		549,284		9.99	%		541,858		9.71	%


	Maturity (1)
	One year or less (2)		Over 1 through 5 years		Over 5 years		Total
Construction and land development	$	37,240	$	58,910	$	90,701	$	186,851
Agricultural real estate		12,284		141,735		234,922		388,941
1-4 family residential properties		23,462		115,959		379,220		518,641
Multifamily residential properties		35,947		221,099		55,712		312,758
Commercial real estate		197,756		1,362,879		835,457		2,396,092
Loans secured by real estate		306,689		1,900,582		1,596,012		3,803,283
Agricultural loans		158,945		49,677		4,595		213,217
Commercial and industrial loans		338,442		617,239		272,225		1,227,906
Consumer loans		3,109		71,781		4,679		79,569
All other loans		25,512		21,234		128,574		175,320
Total loans	$	832,697	$	2,660,513	$	2,006,085	$	5,499,295


	March 31, 2024			December 31, 2023
Nonaccrual loans	$	18,793		$	18,832
Modified loans which are performing in accordance with revised terms		1,271			1,296
Total nonperforming loans		20,064			20,128
Repossessed assets		1,407			1,164
Total nonperforming loans and repossessed assets	$	21,471		$	21,292
Nonperforming loans to loans, before allowance for credit losses		0.36	%		0.36	%
Nonperforming loans and repossessed assets to loans, before allowance for credit losses		0.39	%		0.38	%


	Three months ended March 31, 2024					Three months ended March 31, 2023					Year ended December 31, 2023
	Average Balance		Weighted Average Rate			Average Balance		Weighted Average Rate			Average Balance		Weighted Average Rate
Demand deposits:
Non-interest-bearing	$	1,367,798	—%			$	1,273,527	—%			$	1,312,023	—%
Interest-bearing		3,036,837		2.20	%		2,504,073		1.56	%		2,618,452		1.83	%
Savings		707,849		0.10	%		640,347		0.12	%		663,760		0.11	%
Time deposits		1,028,045		3.64	%		699,328		1.69	%		961,162		2.98	%
Total average deposits	$	6,140,529		1.71	%	$	5,117,275		1.01	%	$	5,555,397		1.40	%


	March 31, 2024		December 31, 2023
3 months or less	$	183,002	$	183,619
Over 3 through 6 months		195,934		231,187
Over 6 through 12 months		207,190		170,641
Over 12 months		88,487		117,657
Total	$	674,613	$	703,104


	Rate Sensitive Within
	1 years			1-2 years			2-3 years			3-4 years			4-5 years			Thereafter			Total		Fair Value
Interest-earning assets:
Federal funds sold and other interest-bearing deposits	$	274,695		$	—		$	—		$	—		$	—		$	—		$	274,695	$	274,695
Certificates of deposit investments		1,715			2,030			—			—			—			—			3,745		3,745
Taxable investment securities		36,924			34,001			13,268			63,542			104,572			620,024			872,331		872,331
Nontaxable investment securities		2,885			895			1,900			4,125			5,354			258,517			273,676		273,676
Loans		1,600,363			1,003,508			1,168,997			615,630			410,860			699,937			5,499,295		5,134,126
Total	$	1,916,582		$	1,040,434		$	1,184,165		$	683,297		$	520,786		$	1,578,478		$	6,923,742	$	6,558,573
Interest-bearing liabilities:
Savings and NOW accounts	$	355,200		$	377,202		$	314,546		$	262,538		$	219,329		$	1,150,819		$	2,679,634	$	2,679,634
Money market accounts		292,878			187,045			143,819			110,624			85,127			287,684			1,107,177		1,107,177
Other time deposits		867,420			60,412			22,962			48,006			8,401			625			1,007,826		930,726
Short-term borrowings/debt		210,719			—			—			—			—			—			210,719		210,719
Long-term borrowings/debt		189,119			28,755			119,754			6,457			—			25,651			369,736		358,484
Total	$	1,915,336		$	653,414		$	601,081		$	427,625		$	312,857		$	1,464,779		$	5,375,092	$	5,286,740
Rate sensitive assets – rate sensitive liabilities	$	1,246		$	387,020		$	583,084		$	255,672		$	207,929		$	113,699		$	1,548,650
Cumulative GAP		1,246			388,266			971,350			1,227,022			1,434,951			1,548,650
Cumulative amounts as % of total Rate sensitive assets		0.0	%		5.6	%		8.4	%		3.7	%		3.0	%		1.6	%
Cumulative Ratio		0.0	%		5.6	%		14.0	%		17.7	%		20.7	%		22.4	%


	Actual					Required Minimum For Capital Adequacy Purposes			To Be Well-Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio	Amount		Ratio
March 31, 2024
Total capital (to risk-weighted assets)
Company	$	911,432		15.35	%	$	623,272	> 10.50%	N/A		N/A
First Mid Bank		863,888		14.60	%		621,287	> 10.50%	$	591,702	> 10.00%

Tier 1 capital (to risk-weighted assets)
Company		739,782		12.46	%		504,553	> 8.50%	N/A		N/A
First Mid Bank		799,100		13.51	%		502,946	> 8.50%		473,361	> 8.00%

Common equity tier 1 capital (to risk-weighted assets)
Company		715,669		12.06	%		415,514	> 7.00%	N/A		N/A
First Mid Bank		799,100		13.51	%		414,191	> 7.00%		384,606	> 6.50%

Tier 1 capital (to average assets)
Company		739,782		9.71	%		304,756	> 4.00%	N/A		N/A
First Mid Bank		799,100		10.54	%		303,404	> 4.00%		379,255	> 5.00%


December 31, 2023
Total capital (to risk-weighted assets)
Company	$	894,259		14.84	%	$	632,724	>10.50%	N/A		N/A
First Mid Bank		854,235		14.22	%		630,581	>10.50%	$	600,553	> 10.00%
Tier 1 capital (to risk-weighted assets)
Company		724,186		12.02	%		512,205	> 8.50%	N/A		N/A
First Mid Bank		790,917		13.17	%		510,470	> 8.50%		480,443	> 8.00%
Common equity tier 1 capital (to risk-weighted assets)
Company		700,128		11.62	%		421,816	> 7.00%	N/A		N/A
First Mid Bank		790,917		13.17	%		420,387	> 7.00%		390,360	> 6.50%
Tier 1 capital (to average assets)
Company		724,186		9.33	%		310,587	> 4.00%	N/A		N/A
First Mid Bank		790,917		10.23	%		309,151	> 4.00%		386,439	> 5.00%