This report offers a multifaceted examination of First Mid Bancshares, Inc. (FMBH), dissecting its Business & Moat, Financial Statements, Past Performance, and Future Growth to establish a Fair Value. Last updated on October 27, 2025, our analysis benchmarks FMBH against six peers, including Midland States Bancorp, Inc. (MSBI), HBT Financial, Inc. (HBT), and First Busey Corporation (BUSE), while framing key takeaways through the investment philosophies of Warren Buffett and Charlie Munger.
Mixed verdict on First Mid Bancshares. The bank primarily grows by acquiring smaller competitors, which has successfully increased its revenue. However, this expansion has not translated into strong per-share earnings for investors. Its profitability and operational efficiency consistently lag behind more disciplined peers. The stock appears fairly valued, offering little discount for these operational challenges. Investors should weigh the bank's acquisition-led growth against its weaker performance metrics.
US: NASDAQ
First Mid Bancshares, Inc. (FMBH) operates as a diversified financial services holding company, with its primary business being community banking through its subsidiary, First Mid Bank & Trust. The company's business model is centered on relationship-based banking, serving individuals, small to medium-sized businesses, and agricultural clients primarily in Illinois, Missouri, and Texas. Its core operations involve accepting deposits and providing a wide range of lending products, including commercial and industrial, commercial real estate, agricultural, and consumer loans. Beyond traditional banking, First Mid has strategically built out significant noninterest income streams through its wealth management division, which provides trust, investment, and brokerage services, and its insurance brokerage division, which offers various insurance products. These three pillars—community banking (lending and deposits), wealth management, and insurance—form the foundation of its business, with the goal of creating deep, multi-faceted relationships with its customers.
The largest contributor to First Mid's revenue is its lending operation, which generates net interest income. This segment accounted for approximately 68.4% of total revenue in the first quarter of 2024. The bank offers a comprehensive suite of loan products, with a notable emphasis on commercial real estate (which constitutes roughly 49% of the total loan portfolio), commercial and industrial loans (18%), and agricultural loans (13%). The U.S. regional and community banking market is a mature, multi-trillion-dollar industry characterized by intense competition and low single-digit annual growth, heavily influenced by the interest rate cycle. Profitability, measured by Net Interest Margin (NIM), is under pressure industry-wide due to rising deposit costs; First Mid's NIM was 3.28% in Q1 2024, which is in line with many peers but has compressed from previous years. FMBH competes with a wide range of institutions, from small local credit unions to larger regional players like Commerce Bancshares (CBSH) and national giants like JPMorgan Chase, who often have superior technology and scale. The primary customers for First Mid's loans are local businesses, real estate investors, and farmers who value personalized service and local decision-making. The stickiness of these relationships is high due to the complexity of moving commercial credit lines and the trust built over time with loan officers who understand the local economy. The competitive moat for this service is narrow; it is rooted in local market knowledge and high-touch customer service, which creates switching costs. However, this moat is vulnerable to regional economic downturns and aggressive pricing from larger competitors with lower funding costs.
A second key business line is First Mid's wealth management division, a significant and growing source of fee income. This division contributed $9.9 million, or about 11% of total revenue in Q1 2024. Services include investment management, trust and estate planning, and brokerage services for individuals, families, and institutions, with assets under administration totaling approximately $4.6 billion. The U.S. wealth management market is vast, valued at over $1.5 trillion in annual revenue, and is projected to grow at a CAGR of 3-5%. The market is highly fragmented, with competition from wirehouses like Morgan Stanley, independent registered investment advisors (RIAs), and other bank trust departments. First Mid differentiates itself by integrating wealth services with its core banking products, targeting its existing base of affluent and high-net-worth clients. Customers are typically established individuals and business owners in the bank's local communities who seek a trusted, long-term advisor. Customer stickiness is exceptionally high in this segment; trust and personal relationships are paramount, and moving complex trust or estate accounts is a significant undertaking. The moat for the wealth management business is stronger than in lending, built on reputation and high switching costs. By embedding these services within the bank, First Mid creates a sticky, multi-generational revenue stream that is less sensitive to interest rate fluctuations, providing valuable diversification and stability to its overall business model.
First Mid's third pillar is its insurance brokerage segment, which is another major differentiator and source of noninterest income. This segment generated $10.3 million in revenue in Q1 2024, representing about 12% of the company's total revenue. The division operates as an independent insurance agency, offering a broad range of products including commercial liability, property and casualty, and employee benefits to its business clients, as well as personal lines of insurance. The U.S. insurance brokerage market is a mature industry worth over $150 billion, with low-to-mid single-digit growth expected annually. Competition is intense, ranging from small local agencies to large national brokers like Marsh & McLennan and Aon. FMBH's primary competitive advantage is its ability to cross-sell insurance products to its established commercial banking client base. The target customers are the same small and medium-sized businesses that use the bank for loans and deposit services. This creates a powerful synergy, as business owners often prefer to bundle their financial services with a single trusted provider for convenience. The stickiness of these insurance customers is moderate to high; while they can shop for better rates, the convenience of a bundled relationship and the trust established with the bank act as significant retention drivers. This segment's moat is derived from the cross-selling ecosystem FMBH has built. By integrating banking, wealth, and insurance, the company deepens its client relationships and significantly raises switching costs, creating a more durable competitive position than a standalone bank could achieve.
In conclusion, First Mid Bancshares has constructed a resilient business model for a bank of its size, leveraging its community banking foundation to support two high-margin, fee-generating businesses in wealth management and insurance. This diversification is the company's greatest strength, providing a substantial buffer against the volatility of net interest income. The noninterest income contribution of over 30% is well above average for a community bank and points to a forward-thinking strategy. This structure enhances customer stickiness and creates a wider competitive moat than one based solely on lending.
However, the company's overall moat remains narrow and is geographically constrained. Its success is heavily tied to the economic health of its specific markets in the Midwest and Texas. While its relationship-based model is effective at the local level, it lacks the scale, brand recognition, and technological advantages of larger regional and national competitors. These larger banks can often offer more competitive pricing and more advanced digital platforms, posing a persistent threat. Therefore, while First Mid's business model is robust and well-diversified, its long-term resilience depends on its ability to defend its local market share and continue successfully integrating its three core business lines against a backdrop of ever-increasing competition.
First Mid Bancshares demonstrates a solid top-line performance, driven primarily by its core lending operations. In its most recent quarter, revenue grew 8.69% to $84.89 million, fueled by a 12.5% increase in net interest income. This indicates the bank is successfully navigating the current interest rate environment to expand its earnings from loans. Profitability remains respectable, with a Return on Assets (ROA) of 1.23% and Return on Equity (ROE) of 10.62%, both of which are generally in line with industry standards for regional banks. The bank also maintains a consistent dividend, signaling confidence from management in its earnings stability.
An examination of the balance sheet presents a more nuanced picture. The bank's tangible capital appears adequate, with a tangible common equity to total assets ratio of 8.38%, providing a decent cushion against unexpected losses. However, liquidity seems tight, as evidenced by a high loan-to-deposit ratio of 93.5%, meaning a large portion of its deposits are already lent out. A significant red flag is the large negative balance in Accumulated Other Comprehensive Income (AOCI) of -$129.68 million, which has eroded over 20% of the bank's tangible book value. This highlights a vulnerability to rising interest rates, as it reflects unrealized losses on its securities portfolio.
From a cash flow and operational perspective, the bank generates positive operating cash flow, though it has been volatile between recent quarters. Cost control appears to be a key challenge. The bank's efficiency ratio of 62.6% is elevated compared to more efficient peers, indicating that a substantial portion of its revenue is consumed by operating expenses rather than contributing to the bottom line. Overall, while FMBH's financial foundation is supported by its ability to generate core interest income, its stability is constrained by high costs and balance sheet sensitivity, creating a riskier profile for conservative investors.
This analysis of First Mid Bancshares' past performance covers the fiscal years 2020 through 2024. Over this period, the bank pursued a strategy of rapid expansion through acquisitions, which is clearly visible in its financial history. This approach successfully grew the bank's footprint and top-line numbers, but a closer look reveals significant trade-offs in profitability, efficiency, and shareholder value.
On the surface, growth appears impressive. Revenue grew from $170.8 million in 2020 to $319.4 million in 2024, a compound annual growth rate (CAGR) of nearly 17%. The bank's total assets similarly swelled from $4.7 billion to $7.5 billion. However, this growth has been choppy and has not been efficient. The bank's earnings per share (EPS) have been volatile, with two years of negative growth in the last five, and the five-year CAGR for EPS was a modest 5.1%. This large gap between revenue growth and EPS growth points directly to the cost of the M&A strategy: significant shareholder dilution. To fund its deals, the bank increased its shares outstanding from 17 million to 24 million over the period.
Profitability and efficiency trends also reveal weaknesses. The bank's return on equity (ROE) peaked in 2022 at 11.5% but has since fallen to 9.6%. A more concerning trend is the bank's efficiency ratio, which measures how much it costs to generate a dollar of revenue. This ratio worsened significantly, rising from a respectable 59.4% in 2020 to a less competitive 66.1% in 2024. This indicates that as the bank has gotten bigger, it has become less efficient, a trend that runs counter to the typical goals of M&A. Peer comparisons consistently show FMBH lagging competitors like HBT Financial and First Busey on core profitability metrics like net interest margin and return on assets.
From a capital allocation perspective, the story is mixed. Management has demonstrated a commitment to its dividend, increasing the payout per share each year from $0.81 to $0.94. The dividend payout ratio has remained conservative at around 28%, suggesting it is well-covered by earnings. However, these steady dividend payments have been dwarfed by the dilutive effect of share issuances for acquisitions. The historical record shows a bank that has succeeded in getting bigger, but has struggled to get better, failing to consistently translate its expansion into stronger per-share earnings or improved operational efficiency.
The U.S. regional and community banking industry is navigating a period of significant change, with the next 3-5 years expected to be defined by continued consolidation, technological disruption, and margin pressure. The number of community banks is projected to decline by 2-4% annually as smaller institutions merge to achieve the scale necessary to compete. This trend is driven by several factors: the high cost of investing in digital banking platforms demanded by customers, the increasing complexity of regulatory compliance, and the need to spread overhead costs over a larger asset base. Competitive intensity will remain exceptionally high, not only from other banks but also from fintech companies that target lucrative niches like payments and small business lending. A key catalyst for the industry could be a stabilization or decline in interest rates, which would alleviate the intense pressure on deposit costs and potentially improve net interest margins (NIMs), the core profitability metric for banks. Overall market growth is expected to be modest, tracking nominal GDP at a 2-4% CAGR, making market share gains through M&A and superior service the primary avenues for outperformance.
For First Mid Bancshares, succeeding in this environment will require leveraging its key differentiators while carefully managing the risks in its traditional banking segments. The demand for digital banking services will only accelerate, with digital adoption rates expected to surpass 75%. This forces banks like First Mid to balance investments in technology with maintaining the high-touch, relationship-based service that defines community banking. The shift in customer preference means that growth will come not just from physical branches, but from providing seamless online and mobile experiences for everything from account opening to loan applications. Furthermore, the industry-wide push to diversify revenue streams will continue, as banks seek to reduce their dependence on the cyclical nature of net interest income. First Mid is already well-positioned here, but the challenge will be to grow its fee-based businesses at a pace that can offset the potential stagnation in its core lending operations.
First Mid's largest business, commercial lending (comprising Commercial Real Estate and Commercial & Industrial loans, totaling about 67% of its loan portfolio), faces a challenging growth environment. Current consumption is constrained by elevated interest rates, which have dampened demand for new real estate projects and capital expenditures from businesses. Over the next 3-5 years, consumption growth will likely be concentrated in C&I loans to established, local businesses that value First Mid's relationship model, particularly if regional economic activity picks up. New CRE lending, especially for office and retail properties, may remain weak due to post-pandemic shifts in usage and valuation concerns. The primary catalyst for growth would be a sustained decrease in interest rates, which would lower borrowing costs and unlock pent-up demand. The U.S. commercial lending market is projected to grow at a slow 2-4% CAGR. Competition is fierce, with customers choosing between First Mid's localized service and the sharper pricing offered by larger banks like Commerce Bancshares. First Mid will outperform with clients who prioritize relationships and local decision-making, but it will likely lose larger deals to competitors with greater scale and lower funding costs. The number of commercial lenders is expected to decrease due to consolidation. A key risk for First Mid is its significant concentration in CRE (49% of loans), which carries a medium probability of a downturn in its specific markets, potentially leading to higher credit losses. Another high-probability risk is margin compression from intense price competition on new loans.
Agricultural lending represents a key niche for First Mid, accounting for 13% of its portfolio. This segment's current consumption is shaped by the cyclical nature of farming, with demand for operating lines, equipment loans, and real estate financing being influenced by commodity prices and input costs. Growth is currently constrained by high interest rates on farm debt and volatility in crop prices. Looking ahead, consumption is expected to increase due to the financing needs for technology adoption (precision agriculture) and the generational transfer of farming operations. A major catalyst could be a period of high, stable commodity prices or favorable government policies supporting the agricultural sector. The U.S. ag lending market is valued at approximately ~$500 billion, with growth tied to farm profitability. First Mid competes primarily with the government-sponsored Farm Credit System and other local banks. It wins on its deep regional expertise and long-standing relationships, but often faces pricing pressure from Farm Credit. The number of specialized ag lenders is expected to remain relatively stable. A medium-probability risk for First Mid is a sharp decline in commodity prices, which would directly impact the repayment ability of its farm clients. Another medium-probability risk is the increasing frequency of adverse weather events in the Midwest, which could damage crop yields and collateral values.
First Mid's wealth management division is a significant growth engine and differentiator, with approximately ~$4.6 billion in assets under administration. Consumption of these services—investment management, trust, and estate planning—is currently driven by an aging population preparing for retirement. Growth is constrained by market volatility, which can make potential clients hesitant, and intense competition from a fragmented field of independent advisors and large wirehouses. The next 3-5 years present a massive opportunity, as the "great wealth transfer" from baby boomers to their heirs will accelerate demand for sophisticated estate planning. Growth will primarily come from deepening relationships with existing affluent banking customers. The U.S. wealth management market is expected to grow at a steady 3-5% CAGR. Customers in this space choose advisors based on trust, personal relationships, and perceived expertise. First Mid's key advantage is its ability to leverage its trusted bank brand to cross-sell wealth services. However, it faces competition from independent RIAs who may win over clients seeking a fiduciary-only model. A key risk is fee compression (high probability), as pressure from low-cost automated investment platforms forces traditional advisors to lower fees. Another medium-probability risk is the departure of key financial advisors, which could result in a significant outflow of client assets.
The insurance brokerage division is another pillar of First Mid's stable, fee-based revenue. This segment provides property & casualty, commercial liability, and employee benefits insurance, primarily cross-sold to its business banking clients. Consumption is non-discretionary for most businesses, providing a resilient revenue stream. The primary constraint currently is navigating a "hard" insurance market where rising premiums can lead clients to shop more aggressively for coverage. Over the next 3-5 years, growth will be driven by continued cross-selling to the bank's commercial loan customers and increasing demand for newer products like cybersecurity insurance. The U.S. insurance brokerage market is projected to grow at 3-6% annually. First Mid competes with large national brokers and small local agencies. Its competitive advantage is the convenience of its integrated model, offering a "one-stop-shop" for financial services. This bundling strategy increases customer stickiness. The industry is rapidly consolidating, which could make future agency acquisitions more expensive for First Mid. A medium-probability risk is the challenge of retaining top insurance producers, who are in high demand and can be lured away by larger competitors offering higher compensation.
Looking forward, First Mid's growth strategy will heavily depend on its execution of mergers and acquisitions. As a bank with ~$7.5 billion in assets, it is well-positioned to act as a consolidator of smaller community banks in and around its existing footprint. A successful M&A strategy could provide step-changes in growth, adding loans, deposits, and new customers at a faster pace than organic efforts alone. However, this path is not without risk; successful integration of acquired banks is critical to realizing projected cost savings and maintaining service quality. Parallel to this, First Mid must continue its investment in technology. While it cannot outspend national giants, it must offer a digital platform that is reliable, secure, and user-friendly to avoid losing customers to more tech-savvy competitors. The bank's future hinges on its ability to successfully blend its traditional relationship-based model with modern digital convenience and supplement its modest organic growth with disciplined, well-integrated acquisitions.
As of October 24, 2025, with a stock price of $37.39, First Mid Bancshares, Inc. is positioned as a reasonably priced player within the regional banking industry. A valuation approach weighing multiples, dividends, and asset value points toward a fair value range of $37–$39, which closely brackets the current market price. This narrow upside suggests the stock is fairly valued, offering a limited margin of safety at the current price, making it a candidate for a watchlist rather than an immediate buy for value-focused investors.
The most reliable valuation method for a bank is comparing its multiples to peers. FMBH's trailing P/E ratio is 10.62x, slightly below the industry average, while its forward P/E is 9.33x, implying expected earnings growth. More importantly, its Price-to-Tangible Book Value (P/TBV) is 1.39x, which is consistent with the peer group median of 1.35x. Applying these peer-average multiples to FMBH's own metrics anchors a fair value range of approximately $36 to $39, reinforcing the current market price as reasonable.
From an income perspective, FMBH offers a dividend yield of 2.67%, slightly below the regional bank average. However, the dividend is well-supported by a low payout ratio of 27.55%, indicating sustainability and potential for future growth. The lack of significant share buybacks, with data indicating slight dilution, means the dividend is the primary source of capital return for shareholders. The asset-based approach, which centers on P/TBV relative to profitability (Return on Equity of 10.62%), also supports a fair valuation. The bank's P/B ratio of 1.0x aligns well with its ROE, suggesting the market is not overpaying for its ability to generate profits.
Warren Buffett's investment thesis for regional banks centers on finding simple, predictable businesses with a durable competitive advantage, typically a low-cost deposit franchise, run by honest and capable management. When analyzing First Mid Bancshares in 2025, Buffett would see a straightforward, understandable community bank but would likely be unimpressed by its financial performance. The bank's return on average assets (ROAA) of approximately 0.9% is a key indicator of profitability, and this figure is merely average, falling short of the 1.0% or higher that signals a strong, efficient operator. Furthermore, its heavy reliance on acquisitions for growth introduces integration risks and obscures the underlying health of the organic business, conflicting with Buffett's preference for predictable earnings. Compared to peers like HBT Financial or First Busey which post superior profitability metrics, FMBH does not appear to be a best-in-class institution. The valuation, at around 1.2 times tangible book value, fails to provide the significant 'margin of safety' Buffett would require for a business with average economics. Therefore, Buffett would almost certainly avoid the stock, concluding it is a fair company at a fair price, not the great company at a fair price he seeks. If forced to choose the best banks in this sub-industry, Buffett would likely favor First Busey (BUSE) for its superior scale and diversified model, HBT Financial (HBT) for its best-in-class profitability (ROAA > 1.2%), and Old National Bancorp (ONB) for its fortress-like market position, viewing them as higher-quality franchises worth owning at the right price. Buffett's decision on FMBH could only change if the stock price were to fall significantly, offering a price below its tangible book value, which would provide a substantial margin of safety.
Charlie Munger would likely view First Mid Bancshares as a fundamentally average bank masquerading as a growth story through its aggressive acquisition strategy. Munger's investment thesis for banks rests on finding simple, high-quality franchises that generate superior returns on assets (ROAA) through disciplined underwriting and low-cost deposits, not through constant deal-making. FMBH's mediocre profitability, with a return on assets around ~0.9% and an efficiency ratio near 60%, falls short of the high-quality threshold he would demand, especially when superior peers like QCR Holdings (ROAA >1.4%) and HBT Financial (ROAA >1.2%) exist. The reliance on M&A introduces integration risks and complexity, which Munger would see as 'avoidable stupidity' when cleaner, more profitable organic growth stories are available. For retail investors, the takeaway is clear: Munger would avoid FMBH, counseling that it is better to pay a fair price for a wonderful business than a low price for a fair one. If forced to choose the best regional banks, Munger would likely favor QCR Holdings for its best-in-class organic growth and profitability, HBT Financial for its exceptional efficiency and clean balance sheet, and First Busey for its scale and diversified revenue streams. A change in his decision would require FMBH to halt its M&A focus and prove it can generate consistent organic growth with ROAA metrics climbing above 1.2%.
Bill Ackman would likely view First Mid Bancshares as a structurally average, sub-scale regional bank that lacks the dominant franchise characteristics he typically seeks. He would focus on its profitability metrics, noting that its Return on Average Assets (ROAA) of ~0.9% and efficiency ratio of ~60% lag behind higher-quality peers, suggesting a lack of pricing power or operational excellence. The bank's growth strategy, heavily reliant on serial acquisitions, would be a red flag, as it introduces integration risk without delivering best-in-class returns. Ackman would see a company that is neither a deeply undervalued asset nor a high-quality compounder, placing it in a difficult middle ground. Management's use of cash for acquisitions that yield average results would be scrutinized; Ackman would argue that unless M&A can demonstrably boost per-share value, capital should be returned to shareholders or used to fix the core business. He would conclude that FMBH is an uncompelling investment and would avoid the stock, preferring to focus on either best-in-class operators or clear turnaround situations with greater upside. If forced to choose top names in the sector, Ackman would favor a dominant, scaled player like Old National Bancorp (ONB) for its fortress-like market position or a highly profitable operator like HBT Financial (HBT) for its superior ~1.2% ROAA. Ackman's view would only change if FMBH's valuation fell to a significant discount to its tangible book value, creating a compelling margin of safety for an activist campaign to improve its operational performance.
Overall, First Mid Bancshares, Inc. carves out its competitive space in the crowded regional banking sector through a deliberate strategy of growth-by-acquisition, focusing on smaller community banks within Illinois and neighboring states. This approach has allowed it to build significant scale relative to smaller, single-town banks, creating a substantial network of branches and a diversified loan portfolio. Its core competitive advantage lies in its relationship-based banking model, which fosters customer loyalty among local individuals and small-to-medium-sized businesses who may feel underserved by larger, national institutions. This strategy provides a stable deposit base and consistent lending opportunities, forming the bedrock of its operations.
However, when measured against a broader set of publicly traded regional banks, FMBH's performance reveals certain trade-offs. Its reliance on acquisitions for growth, while effective, can lead to challenges in integration, potential culture clashes, and periods of depressed earnings as one-time merger costs are absorbed. Furthermore, its core operational metrics, such as the efficiency ratio (a measure of a bank's overhead as a percentage of its revenue, where lower is better), are often higher than those of more streamlined peers. This suggests that FMBH has not yet fully realized the economies of scale that its increased size should theoretically provide, positioning it in the middle of the pack rather than at the top.
From an investment perspective, FMBH's profile is that of a traditional, steady regional bank. It appeals to income-oriented investors with its consistent dividend payments. The primary risk and opportunity lie in its M&A execution. A successful acquisition can be accretive to earnings and expand its market presence, but a poorly executed one can strain resources and dilute shareholder value. In a landscape where digital banking and efficiency are paramount, FMBH's challenge is to balance its high-touch community model and acquisition strategy with the necessary investments in technology and cost-cutting initiatives to keep pace with more agile and profitable competitors.
Midland States Bancorp (MSBI) and First Mid Bancshares (FMBH) are very direct competitors, operating with similar community-focused models primarily in Illinois. FMBH is the larger of the two by total assets and has pursued growth through acquisitions more aggressively. In contrast, MSBI has placed a stronger emphasis on integrating its wealth management business to drive non-interest income and has demonstrated slightly better core profitability. The key difference for investors is choosing between FMBH's scale and M&A-driven growth story versus MSBI's focus on profitability and a more diversified revenue stream from wealth services.
In terms of business and moat, both banks rely on the same competitive advantages inherent to community banking. For brand, both have strong local recognition, but FMBH's larger footprint (over 150 locations) gives it a slight edge over MSBI (around 50 locations). Switching costs for core banking customers are moderate and similar for both. For scale, FMBH is larger with total assets of ~$7.5 billion versus MSBI's ~$5.0 billion, providing a modest advantage in lending capacity and operational leverage. Network effects are localized and comparable. Regulatory barriers are identical for both as state-chartered banks. Overall Winner: FMBH, due to its superior scale and broader physical network, which provides a stronger foundation for deposit gathering.
Financially, the comparison reveals differing strengths. In revenue growth, FMBH's M&A strategy gives it an edge in top-line expansion. However, MSBI often posts a better net interest margin (NIM), a key profitability metric for banks, recently reporting ~3.3% against FMBH's ~3.1%; this means MSBI earns more from its loan book. MSBI also tends to be more profitable, with a return on average assets (ROAA) often around 1.0% compared to FMBH's ~0.9%. Both banks are well-capitalized with solid liquidity, but MSBI is better on core earnings power. The payout ratio for dividends is sustainable for both. Overall Financials Winner: MSBI, for its superior profitability metrics (NIM and ROAA), indicating more efficient use of its assets.
Looking at past performance, FMBH has delivered stronger 5-year revenue and asset growth (~12% CAGR vs MSBI's ~5% CAGR) largely due to its acquisitive nature. On margin trend, MSBI has maintained a more stable and slightly higher NIM over the last three years. In terms of total shareholder returns (TSR), both stocks have performed similarly, often tracking the broader regional bank indices with significant volatility tied to interest rate cycles. For risk, both exhibit similar stock volatility (beta near 1.2). Overall Past Performance Winner: FMBH, as its successful execution of M&A has resulted in demonstrably higher top-line growth, a primary objective for a bank of its size.
For future growth, both banks' prospects are tied to the economic health of the Midwest and their ability to execute their strategies. FMBH's main driver is its proven M&A pipeline and ability to integrate smaller banks, which offers a clear path to continued asset growth. MSBI's growth is more reliant on organic loan growth and expanding its wealth management division, which has over $4 billion in assets under administration and provides a valuable source of non-interest income. FMBH has the edge in inorganic growth, while MSBI's path is potentially more stable and profitable. Overall Growth Outlook Winner: FMBH, because its acquisition strategy provides a more direct and scalable lever for growth in a consolidating industry.
From a valuation perspective, the two banks trade at very similar multiples, but MSBI often appears slightly cheaper. MSBI typically trades at a lower price-to-tangible-book-value (P/TBV) multiple, around 1.1x versus FMBH's 1.2x. This metric is crucial for banks as it values the company relative to its hard assets. Furthermore, MSBI generally offers a higher dividend yield, recently around ~4.2% compared to FMBH's ~3.8%. Given its stronger profitability, MSBI's slightly lower valuation and higher yield make it more attractive from a value standpoint. Overall Fair Value Winner: MSBI, as it offers superior profitability and a higher dividend yield at a more compelling valuation.
Winner: Midland States Bancorp, Inc. over First Mid Bancshares, Inc. MSBI secures the win based on its superior core profitability and more attractive risk-adjusted valuation. While FMBH has successfully used acquisitions to achieve greater scale, MSBI consistently demonstrates a stronger ability to generate profits from its assets, as evidenced by its higher ROAA of ~1.0% and net interest margin. Its greater emphasis on wealth management provides a diversifying income stream that FMBH lacks to the same degree. For investors, MSBI offers a more compelling combination of income (higher dividend yield of ~4.2%) and value (lower P/TBV of ~1.1x), making it the stronger choice despite its smaller size.
HBT Financial, Inc. (HBT) is another Illinois-based community bank that serves as a direct competitor to First Mid Bancshares (FMBH). HBT is significantly smaller than FMBH and has historically focused more on organic growth and maintaining a very clean balance sheet with strong credit quality. FMBH, by contrast, is a serial acquirer that has prioritized scale and market expansion. The comparison highlights a strategic divergence: FMBH's broader, more complex organization versus HBT's simpler, more focused, and traditionally more profitable banking model.
Analyzing their business and moat, both operate on a similar community banking model. Brand strength is comparable within their respective local markets, though FMBH's larger footprint (over 150 locations) and brand recognition extend across a wider geography than HBT's (around 60 locations). Switching costs are moderate for both. The most significant difference is scale, where FMBH's ~$7.5 billion in assets dwarfs HBT's ~$4.0 billion, giving FMBH an advantage in lending capacity and brand reach. Regulatory burdens are identical. Overall Winner: FMBH, as its superior scale is a decisive advantage in the regional banking sector, enabling larger loans and greater investment capacity.
From a financial standpoint, HBT often shines in profitability and efficiency. HBT consistently reports a higher net interest margin (NIM), often over 3.5% compared to FMBH's ~3.1%, indicating it generates more profit from its core lending activities. It also typically boasts a much better efficiency ratio, often below 55%, while FMBH's is closer to 60%, meaning HBT spends less to generate each dollar of revenue. Consequently, HBT's return on average assets (ROAA) is superior, frequently exceeding 1.2% versus FMBH's ~0.9%. While FMBH has higher revenue in absolute terms, HBT is the more profitable and efficient operator. Overall Financials Winner: HBT Financial, Inc., due to its consistently superior profitability (ROAA, NIM) and efficiency.
Reviewing past performance, FMBH demonstrates significantly higher historical growth in assets and revenue due to its active M&A strategy. Over the last five years, FMBH's revenue CAGR has been in the double digits, while HBT's growth has been more modest and organic, in the mid-single-digit range. However, HBT has maintained more stable and attractive margins throughout the period. In total shareholder returns (TSR), performance has been competitive, but HBT has shown strong returns since its 2019 IPO. From a risk perspective, HBT's focus on pristine credit quality gives it a more conservative risk profile. Overall Past Performance Winner: HBT Financial, Inc., as its high-quality earnings and disciplined growth have translated into strong risk-adjusted returns for shareholders.
Looking ahead, future growth drivers differ. FMBH's growth is highly dependent on identifying and integrating suitable acquisition targets, a strategy that carries both high potential rewards and significant risks. HBT's future growth relies on deepening its market penetration in central Illinois and leveraging its reputation for strong customer service to drive organic loan and deposit growth. While FMBH's path offers more explosive potential, HBT's is arguably more predictable and less risky. Given the current economic uncertainty, a steady organic growth story has its merits. Overall Growth Outlook Winner: Tie, as FMBH has a clearer path to asset growth via M&A, while HBT's organic strategy is lower risk and potentially more profitable.
In terms of valuation, HBT typically trades at a premium to FMBH, which is justified by its superior profitability. HBT's price-to-tangible-book-value (P/TBV) ratio is often around 1.4x, compared to FMBH's 1.2x. Its P/E ratio is also slightly higher. However, investors are paying for higher quality, as reflected in HBT's superior ROAA and efficiency. FMBH may appear cheaper on a relative basis, but its lower valuation reflects its lower profitability and M&A integration risks. HBT's dividend yield is typically lower than FMBH's. Overall Fair Value Winner: FMBH, as its significant discount on a P/TBV basis provides a better margin of safety for investors, even when accounting for its lower profitability.
Winner: HBT Financial, Inc. over First Mid Bancshares, Inc. HBT Financial earns the victory due to its substantially superior operational efficiency and profitability, which are hallmarks of a high-quality banking institution. Despite being smaller, HBT consistently generates a higher return on assets (>1.2% vs. ~0.9%) and a stronger net interest margin, all while maintaining a lower efficiency ratio (<55% vs. ~60%). This demonstrates a more disciplined and profitable core business. While FMBH offers greater scale and a more direct path to growth via acquisitions, HBT's model of organic growth and pristine credit quality presents a more compelling risk-adjusted investment case. HBT represents quality, while FMBH represents a bet on successful M&A execution.
First Busey Corporation (BUSE) is a formidable competitor to First Mid Bancshares (FMBH), with both banks headquartered in Illinois and sharing significant market overlap. BUSE is considerably larger, with a more diversified business model that includes a significant wealth management arm. This comparison pits FMBH's focused community banking and M&A strategy against BUSE's larger scale, more diversified revenue streams, and long history of stable operations. For investors, BUSE represents a more mature, blue-chip regional bank, while FMBH offers a story more centered on consolidation and growth.
Regarding their business and moat, BUSE has a clear advantage. Its brand is more established and widespread across the Midwest. Both have moderate switching costs typical of the industry. The most significant differentiator is scale, where BUSE's total assets of ~$12 billion are substantially larger than FMBH's ~$7.5 billion. This allows BUSE to handle larger commercial clients and achieve greater operational efficiencies. BUSE also has a more developed wealth management division, FirsTech, which adds a sticky, fee-based revenue stream. Regulatory hurdles are similar but scale gives BUSE more resources to manage compliance. Overall Winner: First Busey Corporation, due to its superior scale, more diversified business mix, and stronger brand recognition.
Financially, BUSE consistently demonstrates stronger performance. BUSE typically reports a higher net interest margin (NIM) and a better efficiency ratio, often below 60%, compared to FMBH, which hovers at or above that mark. This translates into superior profitability, with BUSE's return on average assets (ROAA) generally in the 1.1% - 1.2% range, a noticeable step up from FMBH's ~0.9%. BUSE's larger fee income base from wealth management also provides more stable earnings than FMBH's heavy reliance on net interest income. Both are well-capitalized, but BUSE's financial engine is simply more powerful and efficient. Overall Financials Winner: First Busey Corporation, for its clear superiority in profitability, efficiency, and revenue diversification.
An analysis of past performance further solidifies BUSE's lead. While FMBH has shown faster asset growth in recent years due to its M&A spree, BUSE has a longer track record of steady, profitable growth and consistent dividend increases. Over a 5- and 10-year period, BUSE has delivered more consistent earnings per share (EPS) growth. Its margin trends have been more stable, avoiding the deep troughs that can accompany large acquisitions. Total shareholder returns (TSR) have been competitive, with BUSE often being a less volatile stock (beta closer to 1.0), making it a better performer on a risk-adjusted basis. Overall Past Performance Winner: First Busey Corporation, based on its long-term record of stable, profitable growth and superior risk-adjusted returns.
For future growth, the outlook is more nuanced. FMBH's growth is more directly tied to its next acquisition, offering higher-beta growth potential. BUSE's growth is a mix of organic loan growth in its established markets, expansion of its wealth management services, and opportunistic, disciplined M&A. Analyst expectations for BUSE's earnings growth are typically in the low-to-mid single digits, reflecting its maturity. FMBH could post a double-digit growth year if it closes a significant deal. FMBH has the edge on potential growth rate, but BUSE has a more reliable and diversified growth path. Overall Growth Outlook Winner: FMBH, for having a higher ceiling on near-term growth, albeit with higher execution risk.
Valuation is where FMBH might appear more attractive at first glance. FMBH usually trades at a lower P/E ratio and a lower price-to-tangible-book-value (P/TBV) multiple, often around 1.2x compared to BUSE's 1.5x. This discount reflects FMBH's lower profitability and higher integration risk. BUSE commands a premium valuation because it is a higher-quality institution with more predictable earnings. While FMBH is 'cheaper', BUSE's premium is arguably justified. Both offer attractive dividend yields, often in the 3.5% - 4.0% range. Overall Fair Value Winner: Tie. FMBH is cheaper for a reason, while BUSE is a classic case of 'paying up for quality'. The better value depends on an investor's risk tolerance.
Winner: First Busey Corporation over First Mid Bancshares, Inc. BUSE is the clear winner, operating as a higher-quality, more profitable, and better-diversified institution. Its advantages in scale (~$12B vs ~$7.5B in assets), efficiency (sub-60% ratio), and profitability (ROAA >1.1%) are decisive. Furthermore, its significant wealth management business provides a stable, high-margin fee income that FMBH cannot match. While FMBH offers the potential for faster, M&A-fueled growth, it comes with lower core profitability and higher execution risk. For a long-term investor, BUSE's consistent performance, stronger balance sheet, and more diversified model make it the superior investment.
QCR Holdings, Inc. (QCRH) presents an interesting comparison to First Mid Bancshares (FMBH). While both are Midwest-focused community banks, their growth philosophies have been different. QCRH has built its reputation on a correspondent banking model and strong organic loan growth, driven by a decentralized structure that empowers local bank leadership. FMBH has grown primarily through whole-bank acquisitions. QCRH is often lauded for its entrepreneurial culture and ability to generate industry-leading organic growth, while FMBH is a more traditional consolidator.
Analyzing their business and moat, QCRH has a unique advantage. While both have solid local brands, QCRH's specialized niche in correspondent banking (providing services to smaller banks) creates a distinct, hard-to-replicate network effect and a moat that FMBH lacks. In terms of scale, FMBH is slightly larger with ~$7.5 billion in assets compared to QCRH's ~$7.0 billion, but the difference is not substantial. Switching costs are moderate for both. QCRH's decentralized model, operating under multiple local bank charters (e.g., Quad City Bank & Trust), creates deep community ties. Overall Winner: QCRH Holdings, Inc., due to its unique correspondent banking niche and a proven model for strong organic growth, which constitute a more durable moat than FMBH's scale-through-acquisition strategy.
Financially, QCRH is a stronger performer. QCRH has consistently generated some of the best organic loan growth in its peer group, often in the low-double-digits annually, far outpacing FMBH's organic growth. This strong growth translates into superior profitability. QCRH's return on average assets (ROAA) is frequently above 1.4%, which is excellent for a bank and significantly higher than FMBH's ~0.9%. Its net interest margin (NIM) is also typically wider. While FMBH's revenue is comparable, QCRH's ability to generate more profit from its asset base is a clear sign of a superior business model. Overall Financials Winner: QCRH Holdings, Inc., for its exceptional organic growth, which fuels best-in-class profitability metrics.
Looking at past performance, QCRH has been a standout. The company has delivered a 5-year revenue and EPS CAGR well into the double digits, driven by its powerful organic growth engine. FMBH's growth, while also strong, has been lumpier and more dependent on the timing of acquisitions. In terms of total shareholder return (TSR), QCRH has been a top performer in the regional bank sector over the last five years, significantly outpacing FMBH and the broader banking indices. Its margin trends have also been more consistent. This superior performance makes it a clear winner. Overall Past Performance Winner: QCRH Holdings, Inc., based on its sustained, high-level organic growth which has translated into superior shareholder returns.
For future growth, QCRH's outlook appears brighter and more controllable. Its growth is not dependent on the M&A market. The company can continue to execute its strategy of hiring talented lenders and expanding market share in its existing and adjacent high-growth markets like Springfield, MO. FMBH's growth hinges on its ability to find and integrate targets at reasonable prices, which is a less certain path. Analysts' consensus estimates typically project higher EPS growth for QCRH than for FMBH over the next several years. Overall Growth Outlook Winner: QCRH Holdings, Inc., as its organic growth model is more sustainable, predictable, and historically more potent than FMBH's M&A-dependent strategy.
From a valuation standpoint, the market recognizes QCRH's quality by awarding it a premium valuation. QCRH typically trades at a price-to-tangible-book-value (P/TBV) multiple of 1.6x or higher, compared to FMBH's 1.2x. Its P/E ratio is also higher. This is a clear example of quality versus price. FMBH is the statistically 'cheaper' stock, but QCRH's superior growth and profitability justify its premium. An investor buying QCRH is paying for a best-in-class operator, while an investor in FMBH is buying an average operator at a discount. Overall Fair Value Winner: FMBH, because its significant valuation discount provides a greater margin of safety for investors who are unwilling to pay a premium, even for a high-quality grower like QCRH.
Winner: QCRH Holdings, Inc. over First Mid Bancshares, Inc. QCRH is the decisive winner, representing a best-in-class regional bank with a superior business model. Its key strengths are its industry-leading organic loan growth, which consistently drives exceptional profitability (ROAA >1.4%) and has resulted in outstanding long-term shareholder returns. The bank's unique correspondent banking services and decentralized structure create a durable competitive advantage that FMBH's more traditional, acquisition-focused model cannot replicate. While FMBH is a larger and cheaper stock, QCRH's premium valuation is fully justified by its elite performance. For an investor seeking growth and quality in the regional banking space, QCRH is the far superior choice.
Simmons First National Corporation (SFNC) is a large, multi-state regional bank that represents a significant step up in scale compared to First Mid Bancshares (FMBH). With operations spread across the South and Midwest, SFNC is a serial acquirer like FMBH but on a much larger scale. This comparison highlights the challenges and benefits of scale in banking, pitting FMBH's more concentrated Midwest focus against SFNC's broad, diversified, and more complex franchise. SFNC's performance has been hampered by recent large-scale M&A integration challenges, offering a cautionary tale for FMBH's own strategy.
In the category of business and moat, SFNC's primary advantage is its sheer scale. With total assets exceeding ~$27 billion, it is nearly four times the size of FMBH. This scale provides significant advantages in terms of brand recognition across its six-state footprint, the ability to fund much larger loans, and greater resources for technology and compliance spending. Its geographic diversification also reduces its dependence on any single state's economy, a risk FMBH faces with its concentration in Illinois. Switching costs and regulatory burdens are proportionally similar. Overall Winner: Simmons First National Corporation, as its immense scale and geographic diversification create a much wider and deeper competitive moat.
However, a look at their recent financials tells a different story. SFNC's recent large acquisitions have created significant integration headwinds, leading to a suppressed net interest margin (NIM) and a high efficiency ratio, which has recently been above 65%. FMBH, despite its own M&A, has managed its operations more smoothly, with an efficiency ratio closer to 60%. As a result, FMBH has recently posted a better return on average assets (ROAA) (~0.9%) than SFNC (~0.7%). This demonstrates that bigger is not always better, especially during periods of complex M&A integration. Overall Financials Winner: FMBH, for demonstrating superior profitability and operational control in the recent period, despite its smaller size.
Evaluating past performance, SFNC has a long history of growing through acquisition, which has delivered impressive long-term asset and revenue growth. However, its total shareholder return (TSR) over the last five years has been disappointing and has significantly underperformed both FMBH and the regional bank index. This underperformance is directly linked to the market's concerns over its recent M&A deals and their impact on profitability. FMBH's stock has also been volatile but has held up better. In terms of risk, SFNC's stock has had a larger max drawdown in recent years. Overall Past Performance Winner: FMBH, as its shareholders have experienced better returns and less M&A-related disruption over the past five years.
For future growth, SFNC's path is centered on successfully digesting its recent acquisitions and realizing the promised cost savings and revenue synergies. If management can execute this turnaround, there is significant upside potential for margin expansion and earnings growth. The bank has also initiated a balance sheet repositioning to improve future profitability. FMBH's growth remains tied to smaller, bolt-on acquisitions. SFNC has a more challenging path but also a much greater potential for earnings recovery and upside. Overall Growth Outlook Winner: Simmons First National Corporation, because the successful integration of its recent deals presents a massive, albeit risky, catalyst for earnings growth that FMBH cannot match.
Valuation reflects SFNC's recent struggles. The bank trades at a significant discount to the sector and to FMBH, with a price-to-tangible-book-value (P/TBV) ratio often below 1.0x, compared to FMBH's 1.2x. This means investors can buy SFNC's assets for less than their stated value, pricing in a high degree of pessimism. Its dividend yield is also very attractive, often exceeding 4.5%. For a contrarian or turnaround investor, SFNC offers compelling value if they believe management can right the ship. FMBH is more expensive for its relative stability. Overall Fair Value Winner: Simmons First National Corporation, as its deeply discounted valuation offers a significant margin of safety and high potential reward for patient investors.
Winner: First Mid Bancshares, Inc. over Simmons First National Corporation. FMBH secures the win in this matchup due to its superior recent performance and more stable operational footing. While SFNC possesses a formidable scale advantage, its recent large-scale acquisitions have severely hampered its profitability (ROAA ~0.7%) and efficiency, leading to significant stock underperformance. FMBH, in contrast, has managed its smaller M&A strategy more effectively, delivering better profitability and stronger shareholder returns over the last five years. SFNC is a classic 'show-me' story—a high-risk, high-reward bet on an operational turnaround. FMBH represents the more reliable and currently better-performing investment, making it the winner for most risk profiles.
Old National Bancorp (ONB) is a super-regional bank and a giant in the Midwest banking scene, making it an aspirational peer for First Mid Bancshares (FMBH). With a history dating back to 1834 and a massive asset base, ONB competes with FMBH in several key markets. This comparison showcases the vast gap between a large, established regional powerhouse and a smaller, community-focused consolidator. ONB's strengths are its immense scale, brand power, and diversified services, while FMBH's potential advantage lies in its nimbleness and local touch.
When comparing business and moat, there is no contest. ONB's brand is one of the most recognized banking names in the Midwest. Its scale is overwhelming, with total assets of over $48 billion, which is more than six times larger than FMBH. This scale allows it to offer a complete suite of services, from retail banking to large corporate lending and sophisticated wealth management, that FMBH cannot match. Its network of over 250 branches across multiple states and its significant market share in key metropolitan areas like Chicago and Minneapolis create a formidable moat. Overall Winner: Old National Bancorp, by a very wide margin, due to its overwhelming advantages in scale, brand, and service diversification.
From a financial perspective, ONB's scale translates into efficiency and consistent profitability. Its efficiency ratio is typically in the low 60s, comparable to FMBH, but it achieves this on a much larger and more complex business. Its profitability, as measured by return on average assets (ROAA), is generally solid at around 1.0%, consistently outperforming FMBH's ~0.9%. ONB's diverse revenue streams, including significant fee income from wealth management and capital markets, make its earnings more stable and less dependent on net interest income fluctuations. ONB is a model of what a well-run, large regional bank looks like. Overall Financials Winner: Old National Bancorp, due to its consistent profitability at scale and more diversified, high-quality earnings stream.
Analyzing past performance, ONB has a long and storied history of steady growth and shareholder returns. It has successfully integrated numerous large banks, including the transformative 2022 merger with First Midwest Bancorp. This track record of executing large, complex M&A is a testament to its management team. Over the past decade, ONB has delivered consistent dividend growth and solid total shareholder returns (TSR), with less volatility than smaller peers like FMBH. FMBH's growth rate has been higher in percentage terms recently, but off a much smaller base and with more stock volatility. Overall Past Performance Winner: Old National Bancorp, for its long-term track record of successful M&A integration, stable growth, and dependable shareholder returns.
Looking at future growth, ONB's strategy is to leverage its scale to continue gaining market share in its core Midwest markets while seeking further large-scale, strategic M&A opportunities. Its growth will be more measured than FMBH's in percentage terms, but far larger in absolute dollars. The bank's focus is on optimizing its franchise post-merger and investing in digital capabilities to enhance customer experience and efficiency. FMBH is a growth story; ONB is a story of optimization and market dominance. The upside potential is arguably higher at FMBH, but the certainty is greater at ONB. Overall Growth Outlook Winner: Tie. ONB offers more certain, large-scale growth, while FMBH offers higher-percentage, higher-risk growth potential.
From a valuation standpoint, ONB trades at a premium to FMBH, and for good reason. Its price-to-tangible-book-value (P/TBV) ratio is often in the 1.5x - 1.6x range, compared to FMBH's 1.2x. Its P/E ratio is also higher. Investors are willing to pay more for ONB's stability, scale, and higher-quality earnings. FMBH is cheaper, but it is a smaller, less profitable, and riskier institution. ONB's dividend yield is attractive and very secure, supported by a lower payout ratio than FMBH's. In this case, the premium for quality is justified. Overall Fair Value Winner: Old National Bancorp, as its premium valuation is well-supported by its superior scale, profitability, and lower risk profile, making it a better long-term value proposition.
Winner: Old National Bancorp over First Mid Bancshares, Inc. Old National Bancorp is the unequivocal winner, as it represents a superior banking institution in nearly every measurable category. Its massive advantages in scale, brand recognition, and business diversification create a competitive moat that FMBH cannot breach. Financially, ONB is more profitable (ROAA ~1.0%), has a more stable and diverse earnings stream, and a stronger track record of creating long-term shareholder value. While FMBH is a respectable community bank, it operates in a different league. For an investor, ONB is a blue-chip cornerstone of the Midwest banking industry, while FMBH is a smaller, more speculative play on industry consolidation.
Based on industry classification and performance score:
First Mid Bancshares operates a community-focused banking model, strengthened by significant, diversified fee income from its wealth management and insurance divisions. This balance reduces its reliance on traditional lending, which is a key advantage over many peers. However, its competitive moat is narrow, primarily built on local relationships within a concentrated geographic footprint in the Midwest. While the business is stable, its moat is susceptible to economic downturns in its core markets and competition from larger, more scalable banks, leading to a mixed investor takeaway.
The bank's exceptionally strong and varied fee-based businesses, particularly wealth management and insurance, provide a significant revenue advantage and reduce its dependence on interest rates.
First Mid stands out among its peers with a highly diversified revenue stream. In Q1 2024, noninterest income accounted for 31.6% of its total revenue, a figure that is substantially above the community bank average of 20-25%. This strength is not driven by volatile sources but by two stable, high-margin businesses: wealth management ($9.9 million in Q1) and insurance commissions ($10.3 million). Together, these two segments make up over 70% of its fee income. This robust contribution from non-lending activities provides a critical buffer against the compression of net interest margins and makes the bank's earnings profile more stable and predictable through different economic cycles. This is a clear competitive advantage and a core part of its business model.
First Mid benefits from a well-diversified deposit base spanning retail, commercial, and public-sector clients, with no apparent concentration risks, which supports its funding stability.
First Mid's business model is built on serving a broad cross-section of its local economies, which naturally leads to a diversified deposit base. The bank gathers funds from individuals (retail), small and medium-sized businesses, and public entities like municipalities and school districts. This mix reduces its dependence on any single customer segment. The bank does utilize brokered deposits, which accounted for 8.1% of total deposits in Q1 2024. While this figure is not insignificant, it is within a manageable range and does not suggest an over-reliance on this less stable, wholesale funding source. The absence of disclosed major depositor concentrations further supports the view of a balanced and resilient funding profile, which is a key strength for a community bank.
First Mid has cultivated a meaningful niche in agricultural lending, leveraging its expertise in its rural Midwestern markets to build a differentiated and specialized loan portfolio.
While First Mid is a generalist community bank, it has a distinct specialization in agricultural lending. Agriculture-related loans (both real estate and production) constitute 13% of its total loan portfolio, a significant concentration that reflects its deep roots and expertise in its primary markets of central Illinois and Missouri. This focus allows the bank to better underwrite risk and build sticky relationships with farmers and related businesses, who often require specialized financial products and expertise. This niche provides a competitive edge over out-of-market lenders who lack local knowledge. The significant allocation to this sector, alongside its focus on local commercial borrowers, demonstrates a clear strategy to be a leading lender in specific, defensible market segments.
The bank's deposit base is under pressure, with a below-average proportion of noninterest-bearing deposits and rising funding costs, indicating a weakening in this historically strong area.
A stable, low-cost deposit base is critical for a bank's profitability. At the end of Q1 2024, First Mid's noninterest-bearing deposits made up 23.8% of its total deposits. This is below the 30%+ level typically considered a sign of a very strong core deposit franchise and is lower than many high-performing peers. Consequently, the bank's total cost of deposits has risen to 2.16%, reflecting a greater reliance on more expensive interest-bearing accounts and time deposits to fund its loan growth. On a positive note, estimated uninsured deposits stand at 28% of total deposits, a manageable level that reduces the risk of large outflows during market stress. However, the relatively low level of 'free' deposits and the increasing cost of funds point to a less sticky and less profitable deposit base compared to top-tier community banks, justifying a fail.
First Mid's branch network appears reasonably efficient for its community-focused model, but its deposits per branch are average, indicating it lacks the strong operating leverage of larger-scale peers.
First Mid operates a network of 77 banking centers, which serves as the primary channel for its relationship-based strategy. With total deposits of approximately $6.3 billion, the bank averages around $82 million in deposits per branch. This level of productivity is largely in line with the community bank average but falls short of the over $100 million per branch often seen at more efficient regional banks. The network's value lies in its deep penetration into local Illinois and Missouri markets, fostering the client relationships that are central to its moat. However, the lack of superior branch-level productivity suggests that while the network is core to its identity, it does not provide a strong competitive cost advantage. The bank's physical presence is a necessary component of its community focus but does not translate into best-in-class operating leverage.
First Mid Bancshares' recent financial statements show a profitable bank with strong core income growth, but also reveal some significant challenges. Net interest income grew a healthy 12.5% in the latest quarter to $63.86 million, and profitability metrics like Return on Equity at 10.62% are solid. However, the bank's efficiency ratio of 62.6% is weaker than peers, suggesting high operating costs, and its tangible equity is negatively impacted by unrealized investment losses. The investor takeaway is mixed, as strong earnings power is tempered by operational inefficiencies and balance sheet sensitivity to interest rates.
The bank maintains a solid tangible equity buffer relative to its assets, but its high loan-to-deposit ratio suggests tighter liquidity than its peers.
First Mid Bancshares presents a mixed profile on capital and liquidity. On the positive side, its capital buffer appears healthy. The ratio of tangible common equity to total assets was 8.38% ($643.67 million in TCE divided by $7.68 billion in assets) in the latest quarter. This is a solid figure, in line with the industry benchmark of 8-9%, indicating a good capacity to absorb potential losses. While regulatory capital ratios like CET1 were not provided, this tangible equity level is reassuring.
However, the bank's liquidity position is a point of weakness. Its loan-to-deposit ratio stands at 93.5% ($5.79 billion in gross loans to $6.19 billion in deposits). This is above the industry benchmark of around 90%, suggesting that the bank is heavily utilizing its deposit base to fund lending activities, leaving a smaller cushion of readily available funds. Without data on uninsured deposits or available liquidity, this high ratio raises a flag about its ability to handle unexpected deposit outflows without having to sell assets or seek more expensive funding.
The bank's allowance for credit losses appears adequate relative to its total loan portfolio, and foreclosed assets are minimal, suggesting stable credit quality.
Based on available data, First Mid Bancshares appears to be managing its credit risk prudently. The bank's allowance for credit losses (ACL) was $71.16 million against a gross loan portfolio of $5.79 billion in the most recent quarter. This results in a reserve coverage ratio of 1.23% of total loans. This level is average and considered adequate for a regional bank, falling within the typical industry benchmark range of 1.2% to 1.5%.
Furthermore, other indicators of distressed assets are very low. The amount of 'other real estate owned and foreclosed' is minimal at just $1.68 million, which is a strong positive sign. While key metrics like net charge-offs or nonperforming loans as a percentage of total loans are not provided, the consistent provisioning for loan losses ($2.57 million in the last quarter) and a solid allowance level suggest that management is proactively setting aside funds to cover expected losses and maintaining a clean loan book.
The bank's tangible equity is significantly reduced by unrealized losses on its investment portfolio, indicating notable vulnerability to past interest rate hikes.
A key risk for First Mid Bancshares is its exposure to interest rate fluctuations, which is clearly visible in its balance sheet. The bank reported -$129.68 million in 'Comprehensive Income and Other', which is primarily unrealized losses on its investment securities portfolio (AOCI). This figure represents a substantial 20.1% of its tangible common equity of $643.67 million. This is a significant weakness, as it shows that rising interest rates have materially eroded the bank's tangible book value, potentially limiting its financial flexibility.
While data on the specific duration of its securities or the mix of variable-rate loans is not provided, the large negative AOCI balance alone is a major concern. It suggests that a significant portion of its securities portfolio is locked into lower-yielding, fixed-rate assets. Should the bank need to sell these securities to generate liquidity, it would be forced to realize these losses, directly impacting its earnings and capital. This level of sensitivity is a considerable risk for investors.
The bank is demonstrating strong growth in its core earnings from lending, with consistent double-digit increases in net interest income.
The bank's core profitability engine, its net interest income (NII), is performing strongly. In the most recent quarter, NII grew 12.5% year-over-year to $63.86 million. This robust growth is a significant strength and follows an impressive 18.23% increase for the full prior fiscal year. This trend indicates that the bank is successfully expanding its loan book and/or managing its asset and liability pricing effectively to widen the spread between what it earns on loans and pays on deposits.
While the specific Net Interest Margin (NIM) percentage is not provided, the powerful growth in NII is a clear positive indicator. This performance is well above what many peers have reported, showcasing the bank's ability to generate strong fundamental earnings. For investors, this consistent growth in the bank's primary source of revenue is a key reason for optimism and suggests a healthy underlying lending operation.
The bank's efficiency ratio is weaker than its peers, indicating that its operating costs are high relative to the revenue it generates.
First Mid Bancshares' primary operational weakness is its cost structure. In the latest quarter, its efficiency ratio was 62.6%, calculated by dividing its noninterest expenses of $54.76 million by its total revenue of $87.45 million. This figure is notably weak compared to the industry benchmark, where efficient banks typically operate below 60%, with top performers closer to 50%. A higher ratio means more of each dollar of revenue is spent on overhead, such as salaries and occupancy costs, leaving less for shareholders.
Salaries and employee benefits are the largest expense component, accounting for over 61% of noninterest expenses. While some of this is necessary to support growth, the elevated efficiency ratio suggests the bank may lack the scale or cost discipline of its competitors. Improving operational efficiency is crucial for boosting profitability and competing effectively in the long run.
First Mid Bancshares' past performance from fiscal year 2020 to 2024 is defined by aggressive, acquisition-fueled growth. While total revenue grew at a strong 16.9% annually, this did not translate effectively for shareholders, as earnings per share (EPS) grew a much slower 5.1% annually and were highly volatile. The bank consistently increased its dividend, but this positive was overshadowed by a 41% increase in shares outstanding, diluting existing owners. Compared to peers, FMBH's profitability and efficiency metrics have been weaker. The investor takeaway is mixed, leaning negative, as the bank's 'grow-at-all-costs' strategy has expanded the company but has not consistently created per-share value.
The bank has successfully executed its strategy of growing its balance sheet through acquisitions, with both loans and deposits showing strong, albeit lumpy, growth over the past several years.
Over the last three fiscal years (2021-2024), First Mid Bancshares has significantly expanded its core business lines. Net loans grew at an impressive 12.4% compound annual rate, rising from $3.9 billion to $5.6 billion. Total deposits also saw healthy growth, increasing at a 6.9% annual rate from $5.0 billion to $6.1 billion. This growth is a direct result of the company's M&A activity, which causes its balance sheet to expand in large steps rather than through smooth, organic growth.
This growth has led the bank to put more of its balance sheet to work. The loan-to-deposit ratio, a measure of how much of the bank's deposits are loaned out, has climbed from 79.5% in 2021 to 92.4% in 2024. While this shows the bank is effectively deploying its funding base, a ratio above 90% can also signal higher liquidity risk, leaving less of a cash cushion. While the growth has not been organic, the bank has proven its ability to execute its primary strategy of consolidation.
The bank's operational efficiency has materially worsened over the last five years, and its core profitability lags peers, indicating a failure to achieve synergies from its acquisitions.
Despite growing its net interest income through acquisitions from $127.4 million in 2020 to $228.7 million in 2024, the bank's underlying profitability and cost discipline have deteriorated. The efficiency ratio, a key measure of a bank's overhead, has climbed from a solid 59.4% in 2020 to an uncompetitive 66.1% in 2024. This trend suggests that the costs of integrating acquired banks and managing a larger organization have outpaced revenue growth, eroding profitability.
Furthermore, the bank's core profitability from lending, measured by the Net Interest Margin (NIM), is noted to be weaker than its direct competitors. While exact figures are not provided, peer comparisons state FMBH's NIM is around ~3.1%, while competitors like MSBI and HBT achieve ~3.3% to over 3.5%. A weaker NIM means the bank earns less on its portfolio of loans and investments. The combination of a deteriorating efficiency ratio and a subpar NIM is a significant red flag in its historical performance.
Despite significant M&A-driven expansion, earnings per share (EPS) growth has been lackluster and highly volatile, failing to consistently reward shareholders on a per-share basis.
A review of FMBH's earnings history shows a clear disconnect between the company's growth and shareholder value creation. Over the past five fiscal years, EPS has been on a rollercoaster: $2.71 (2020), $2.88 (2021), $3.62 (2022), $3.17 (2023), and $3.31 (2024). This includes two years of negative growth, most notably a -12.5% drop in 2023. The compound annual growth rate from 2020 to 2024 was just 5.1%, a weak result for a bank that nearly doubled its revenue in the same period.
The underwhelming EPS growth is a direct consequence of the bank's strategy of funding acquisitions by issuing new shares, which dilutes the earnings available to each existing share. While the bank's three-year average Return on Equity (ROE) of 10.3% is adequate, the trend is negative, falling from a peak of 11.5% in 2022. Ultimately, the historical record shows that the bank's growth has not reliably translated into higher per-share profits for its owners.
The bank's credit cost has been volatile, with inconsistent provisions for loan losses over the past five years, suggesting a less predictable credit profile than top-tier peers.
Assessing a bank's historical credit performance requires looking at the consistency of its preparations for bad loans. At FMBH, the provision for credit losses has been erratic, swinging from a high of $16.1 million in 2020 and $15.2 million in 2021 down to $4.8 million in 2022 before settling in the $5-6 million range. This lumpiness can be attributed to acquisitions and changing economic outlooks, but it points to a lack of smooth, predictable credit performance.
On a positive note, the bank has maintained a solid cushion against potential losses. Its allowance for credit losses as a percentage of gross loans has remained in a healthy range of 1.2% to 1.4% over the last five years. As the loan book grew from $3.1 billion to $5.7 billion, the total allowance appropriately increased from $41.9 million to $70.2 million. However, the unstable path of provisions used to build that allowance reflects a reactive rather than a proactively stable credit management history.
The bank has a reliable history of annual dividend increases with a safe payout ratio, but this positive is heavily outweighed by substantial shareholder dilution from its acquisition-heavy strategy.
First Mid Bancshares has consistently rewarded shareholders with a growing dividend. The dividend per share increased steadily from $0.81 in fiscal 2020 to $0.94 in 2024, representing a compound annual growth rate of 3.8%. This commitment is supported by a conservative payout ratio that has remained stable at around 28% of earnings, indicating the dividend is not a strain on the company's profits and is likely to be sustained.
However, the story of capital returns is dominated by share issuance, not buybacks. To fund its numerous acquisitions, the bank's total shares outstanding ballooned from 17 million at the end of 2020 to 24 million by year-end 2024, a 41% increase. This significant dilution means each shareholder's slice of the ownership pie has shrunk considerably. The bank has conducted minimal share repurchases, making its strategy clearly focused on growth through issuing stock rather than returning capital through buybacks.
First Mid Bancshares' future growth outlook is mixed, characterized by a tale of two businesses. The bank's standout feature is its highly developed fee-income divisions in wealth management and insurance, which provide stable, diversified growth opportunities that few peers can match. However, its core banking operations face significant headwinds from a competitive lending environment, persistent pressure on interest margins, and a reliance on the modest economic growth of its Midwestern markets. While M&A offers a path for expansion, organic growth in the traditional lending book is likely to be sluggish. The investor takeaway is therefore cautious; the bank's stability is high, but its growth trajectory appears limited.
The combination of a challenging interest rate environment and a high concentration in commercial real estate suggests a sluggish outlook for organic loan growth.
First Mid's prospects for strong organic loan growth appear limited in the near term. The current environment of elevated interest rates is suppressing borrowing demand across the economy. This is particularly true for the commercial real estate (CRE) sector, which constitutes a significant 49% of the bank's loan portfolio and is facing headwinds from changing property usage and higher financing costs. While the bank's relationship-focused model may help it retain clients and win some business, the overall market conditions point toward modest, low-single-digit loan growth at best. Without a clear catalyst for a rebound in borrowing, the outlook for the bank's primary revenue driver is weak.
In a consolidating industry, First Mid's growth will be significantly driven by its ability to execute strategic acquisitions, a necessary and credible path to creating shareholder value.
For a bank of First Mid's size, mergers and acquisitions are a primary tool for accelerating growth in assets, earnings, and market presence. The regional banking landscape is highly fragmented, presenting ample opportunities to acquire smaller banks within or adjacent to its current markets. First Mid has a history of using M&A to expand its footprint and add complementary business lines, such as its insurance division. While execution risk is always a factor in M&A, a disciplined acquisition strategy is one of the most viable paths for the bank to generate meaningful growth in earnings per share and tangible book value over the next 3-5 years. This forward-looking strategy is a key component of the investment case.
The bank's branch network productivity is average, and without a clearly stated plan for optimization and cost savings, its strategy for improving efficiency remains unclear.
First Mid operates 77 banking centers, averaging approximately ~$82 million in deposits per branch. This level of productivity is in line with industry averages but does not suggest a significant competitive advantage in terms of operating leverage. For a bank focused on community relationships, a physical presence is essential, but future profitability growth will depend on optimizing this footprint—consolidating less productive locations and driving more transactions to lower-cost digital channels. The company has not provided specific targets for branch closures, cost savings, or digital user growth, making it difficult for investors to assess the potential for future efficiency gains. This lack of clear forward-looking guidance on a key operational lever warrants a cautious outlook.
Ongoing pressure from rising deposit costs and a below-average level of noninterest-bearing deposits will likely continue to compress the bank's net interest margin.
The outlook for First Mid's net interest margin (NIM), a key measure of profitability, is challenged. The bank's cost of deposits has been rising steadily to 2.16% as competition for funding remains intense. Furthermore, its proportion of noninterest-bearing deposits, at 23.8%, is lower than that of many top-performing peers, providing less of a buffer against these rising costs. While the bank will benefit from some loans repricing at higher rates, the upward pressure on funding costs is expected to persist, leading to a flat or slightly compressed NIM in the coming quarters. This pressure on the bank's core profitability engine is a significant headwind.
The bank's exceptionally strong and diversified fee-income businesses provide a distinct and stable platform for future growth, reducing its reliance on volatile interest income.
First Mid stands out from its peers with noninterest income representing over 30% of its total revenue, a figure well above the community bank average. This strength is rooted in its substantial wealth management (~$4.6 billion AUM) and insurance brokerage divisions. These businesses provide stable, recurring revenue that is not directly tied to the interest rate cycle. Future growth plans are centered on deepening the penetration of these services within the bank's existing commercial and retail client base. This established, high-margin platform provides a clear and durable growth pathway that offers a significant advantage over more traditional, spread-reliant competitors.
Based on its current metrics, First Mid Bancshares, Inc. (FMBH) appears to be fairly valued. As of October 24, 2025, with a price of $37.39, the stock's valuation is well-aligned with the broader regional banking sector. Key indicators like its Price-to-Earnings and Price-to-Tangible-Book multiples are in line with industry averages, suggesting limited upside potential. While its dividend is sustainable, the overall shareholder return is muted by a lack of buybacks. The takeaway for investors is neutral; the stock presents a solid, but not deeply discounted, opportunity.
The stock trades at a premium to its tangible book value, which seems adequate but not compelling given its current return on equity.
Price to Tangible Book Value (P/TBV) is a primary valuation tool for banks. FMBH trades at a P/TBV of 1.39x (based on a $37.39 price and $26.83 tangible book value per share). This valuation is set against a Return on Equity (ROE) of 10.62%. While its P/TBV is in line with the industry median of 1.35x, it does not represent a discount. For a bank to be considered undervalued on this metric, investors often look for a P/TBV below 1.0x or a ratio that is significantly lower than its peers with similar profitability. Since FMBH is priced in line with the average, it fails the test for offering a distinct value opportunity.
The Price-to-Book multiple is well-supported by the bank's current Return on Equity, suggesting a rational alignment between market valuation and profitability.
A bank's Price-to-Book (P/B) ratio should logically correlate with its Return on Equity (ROE). A higher ROE demonstrates greater profitability and justifies a higher P/B multiple. FMBH has a P/B ratio of 1.0x (based on a $37.39 price and $37.27 book value per share) and an ROE of 10.62%. A common benchmark for fair value is a P/B ratio that is roughly equivalent to the ROE divided by a baseline cost of equity (often around 10%). Here, a P/B of 1.0x for an ROE of 10.62% represents a very close and reasonable alignment. This indicates the market is not overpaying for the company's ability to generate profits from its equity base.
The P/E ratio appears reasonable when compared to its forward growth estimate, suggesting the price is aligned with near-term earnings expectations.
The company's trailing twelve-month (TTM) P/E ratio is 10.62x, while its forward P/E ratio is lower at 9.33x. The drop in the P/E multiple implies expected earnings growth. Based on the TTM EPS of $3.52 and an implied forward EPS of $4.01 (calculated from the current price and forward P/E), the market anticipates earnings to grow by approximately 13.9%. This results in a PEG ratio (Forward P/E / Growth) of roughly 0.67 (9.33 / 13.9). A PEG ratio below 1.0 is often considered attractive, indicating that the stock's price may be undervalued relative to its expected growth. This strong relationship between price, earnings, and expected growth justifies a "Pass".
The stock offers a moderate dividend yield with a safe payout ratio, but a lack of recent buybacks and slight shareholder dilution limits the total shareholder return.
First Mid Bancshares provides a dividend yield of 2.67%, backed by a conservative payout ratio of 27.55%. This low ratio ensures the dividend is well-covered by earnings and can be sustained. The dividend has also grown 4.3% year-over-year. However, a comprehensive capital return strategy often includes share repurchases. The company's buybackYieldDilution metric stands at -1.41% (current), indicating that more shares were issued than repurchased, leading to shareholder dilution. A pass in this category would require a more compelling total yield, combining a solid dividend with a positive buyback program.
Compared to typical regional bank peers, FMBH's valuation multiples are broadly in-line, offering neither a significant discount nor a steep premium.
This factor assesses whether the stock is cheap or expensive relative to its competitors. FMBH's TTM P/E of 10.62x is slightly below the regional bank average of ~11.7x, while its P/TBV of 1.39x is very close to the peer median of 1.35x. Its dividend yield of 2.67% is somewhat less than the average 3.31% for regional banks. The stock's beta of 0.88 indicates slightly lower volatility than the market. Overall, these metrics paint a picture of a company valued squarely within the peer group average. A "Pass" would require the stock to trade at a clear discount across multiple key metrics, which is not the case here.
The primary macroeconomic risk for First Mid Bancshares is the persistence of high interest rates and the potential for an economic downturn. The current 'higher for longer' rate environment puts sustained pressure on the bank's net interest margin (NIM)—the difference between what it earns on loans and pays for deposits. FMBH's NIM has already compressed, falling from over 3.5% in early 2023 to around 3.0% more recently, as competition forces it to pay more to retain customer deposits. Should the economy weaken, the bank would face elevated credit risk. A slowdown could lead to higher loan delinquencies and charge-offs, particularly in its commercial and commercial real estate (CRE) loan portfolios, which are sensitive to business cycles and property value fluctuations.
Within the banking industry, FMBH confronts intense and evolving competition. It competes for deposits not only with larger national banks that have extensive marketing budgets and advanced technology but also with non-bank financial firms and high-yield online savings accounts that attract rate-sensitive customers. This fierce competition for funding can permanently increase the bank's cost structure. Furthermore, regional banks are under greater regulatory scrutiny following the banking turmoil of 2023. This could translate into higher compliance costs, stricter capital requirements, and more rigorous oversight of liquidity and interest rate risk management, potentially constraining the bank's operational flexibility and growth prospects in the coming years.
Company-specific risks are centered on First Mid's long-standing strategy of growth through acquisition and its loan portfolio concentration. While acquisitions have fueled its expansion, this approach carries inherent dangers, including the risk of overpaying for a target, difficulties in integrating different corporate cultures and systems, and failing to achieve projected cost savings. A misstep in a future acquisition could be costly for shareholders. Additionally, like many community and regional banks, its loan book has significant exposure to specific sectors like commercial real estate and is geographically concentrated in the Midwest. This lack of diversification means that a regional economic downturn or a slump in the CRE market could have a disproportionately negative impact on its financial health compared to a more diversified national competitor.
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