First Mid's Loan Book Shrinks as Record Earnings Hold

The Tip Desk · November 10, 2026 · 4 min read

Third-quarter 2026 net interest income was $79.4 million and net income reached $33.3 million, or $1.25 per diluted share, as loans fell $85.8 million to $6.85 billion and the tax-equivalent net interest margin compressed 3 basis points to 3.76%.

First Mid Bancshares, Inc. (FMBH), a $9.4 billion community-focused organization, reported net income of $33.3 million, or $1.25 per diluted share, for the quarter ended September 30, 2026, a record high for the company. Net interest income was $79.4 million. Adjusted net income was $33.6 million, or $1.26 per diluted share.

The result marked a step-up from $27.8 million, or $1.04 a share, in the second quarter. Return on average assets was 1.45%.

Net interest income was $79.4 million, down $0.3 million from the second quarter. Interest income rose $1.8 million, while interest expense rose $2.1 million. The company said the decline was driven by lower average loan balances and a higher cost of funding from rate increases and deposit pricing competition. Accretion income was $3.8 million, in line with the prior quarter.

Versus the third quarter of 2025, net interest income increased $13.0 million, or 19.6%. Interest income was higher by $20.6 million, inclusive of a $0.7 million increase in accretion, and interest expense was higher by $7.6 million. The company attributed the year-over-year lift to organic earning-asset growth and the addition of Two Rivers Bank & Trust.

Tax-equivalent net interest margin compressed 3 basis points to 3.76% from 3.79% in the second quarter, reversing a 1 basis point expansion in that prior period. The yield on earning assets improved 6 basis points, but the company said that gain was outpaced by a higher average cost of funds. The average cost of interest-bearing deposits rose 18 basis points to 2.16% from the end of the previous quarter.

Total loans ended the quarter at $6.85 billion, a decrease of $85.8 million, a much larger quarterly decline than the $9.9 million drop in the second quarter. The company said the decrease was on a combination of elevated payoffs and disciplined pricing, concentrated in commercial real estate after a partial collateral sale of a multi-location business and subsequent loan payoff. Growth in other portfolios was described as well diversified.

Total deposits rose $44.2 million to $7.62 billion. Money-market accounts increased $198.8 million, which the company tied to an early-2026 deposit product refresh and continued marketing. Non-interest-bearing demand deposits were $1.47 billion.

Criticized assets declined $45.9 million. Special mention loans fell $37.6 million to $101.5 million and substandard loans fell $8.3 million to $131.6 million, versus a $9.7 million criticized-asset decline in the second quarter. The company said the declines were driven by upgrades, paydowns, and external refinances. Non-performing loans rose $1.8 million to $43.1 million, or 0.63% of loans. The allowance for credit losses ended at $86.5 million, or 1.26% of loans. Provision expense was a $0.3 million release; net charge-offs were $0.2 million.

Non-interest income was $27.2 million. Wealth management revenues were $7.4 million and insurance commissions were $7.5 million, which the company attributed to seasonality. Ag services revenue was $2.0 million. Non-interest expense fell to $65.0 million from $70.6 million as Two Rivers acquisition-related costs dropped to $0.4 million from $7.1 million. Salaries and benefits rose $1.0 million on variable compensation. The adjusted efficiency ratio was 56.13%.

Common equity tier 1 capital was 13.91%, Tier 1 14.39%, total capital 15.79%, and the leverage ratio 11.29%. The company paid off $10.0 million of subordinated debt and declared a $0.26 quarterly dividend. Tangible book value per share declined $0.06, or 0.2%, to $31.09, as a $32.3 million increase in unrealized investment losses lowered tangible book value by $1.21, materially offset by earnings growth.

In late October, after the quarter closed, First Mid sold investment securities with a weighted average yield of 1.51% for a loss of $14.8 million, generating $175.8 million of cash. The company said the proceeds are expected to be reinvested at higher rates with an earn-back period of less than two years. It also announced a pending acquisition of Evergreen Bancshares, Inc., and its subsidiary American Bank of Freedom, which Chief Executive Officer Matthew Smith said will deepen the company’s presence in Missouri, Illinois, and Indiana and better position it to move past the $10 billion asset threshold. First Mid also agreed to acquire Winship Farm Management in Putnam, Ill., expected to add more than 8,600 acres under management over the next three years.