First Mid Bancshares, Inc. (FMBH): SWOT Analysis [10-2024 Updated]

In the dynamic landscape of the financial services industry, First Mid Bancshares, Inc. (FMBH) stands out with its robust performance and strategic initiatives. As we delve into the SWOT analysis for 2024, we'll explore the company's strengths, weaknesses, opportunities, and threats that shape its competitive position. From impressive net income growth to emerging challenges from economic shifts, understanding these factors is crucial for investors and stakeholders alike. Read on to uncover the key insights behind FMBH's strategic planning and future potential.

First Mid Bancshares, Inc. (FMBH) - SWOT Analysis: Strengths

Strong net income of $19.5 million in Q3 2024, reflecting a solid performance.

First Mid Bancshares reported a net income of $19.5 million for the third quarter of 2024, translating to a diluted earnings per share of $0.81.

Year-over-year growth of 16.6% in wealth management and insurance revenues.

Wealth management and insurance revenues increased by 16.6% year-over-year, highlighting strong performance in these segments, with total noninterest income reaching $23.0 million.

Increased tangible book value per share by 6.6% in the recent quarter.

The tangible book value per share rose by 6.6% to $24.82 in Q3 2024, reflecting improved financial stability and growth.

Diverse loan portfolio with significant growth in commercial real estate and agricultural loans.

Total loans increased to $5.62 billion, with notable growth in commercial real estate loans amounting to $2.44 billion and agricultural operating loans reaching $233.4 million.

High credit quality with a non-performing loans ratio of only 0.32%.

The non-performing loans ratio stood at 0.32%, indicating strong asset quality and effective credit risk management.

Consistent increase in net interest income, up 14.1% compared to Q3 2023.

Net interest income for Q3 2024 was reported at $57.5 million, which is a 14.1% increase compared to the same quarter in 2023.

Strong capital ratios, comfortably above regulatory requirements, indicating financial stability.

First Mid Bancshares maintained strong capital ratios, including a total capital to risk-weighted assets ratio of 15.24% and a Tier 1 capital to risk-weighted assets ratio of 12.70%.

Effective cost management with a controlled efficiency ratio of 61.3%.

The efficiency ratio for Q3 2024 was 61.3%, reflecting effective cost management practices amidst growth.

First Mid Bancshares, Inc. (FMBH) - SWOT Analysis: Weaknesses

Total deposits decreased slightly by 0.04% in the last quarter.

Total deposits for First Mid Bancshares, Inc. stood at $6.09 billion as of September 30, 2024, reflecting a decrease of $26.9 million, or 0.04%, compared to the prior quarter. This decrease included $55.0 million from brokered certificates of deposit (CDs) that matured at the end of the quarter. Excluding these brokered CDs, deposits increased primarily due to higher CDs offsetting a decline in interest-bearing demand deposits.

Rising non-interest expenses, driven by acquisitions and inflationary pressures.

In the third quarter of 2024, First Mid Bancshares reported non-interest expenses totaling $53.9 million, up from $51.4 million in the previous quarter. This represents an increase of $2.5 million, driven by the acquisition of Mid Rivers Insurance Group, higher salaries and benefits due to increased incentive compensation, and inflationary pressures.

Dependence on interest income, which is susceptible to interest rate fluctuations.

For the third quarter 2024, First Mid Bancshares generated total interest income of $91.18 million. The company is heavily reliant on interest income, which accounted for the majority of its revenue. As interest rates fluctuate, this reliance exposes the company to potential risks associated with declining interest margins.

Limited geographic diversification, primarily operating in Illinois, Missouri, Texas, and Wisconsin.

First Mid Bancshares predominantly operates within a limited geographic footprint, focusing on Illinois, Missouri, Texas, and Wisconsin. This limited geographic diversification can pose risks, as economic downturns or regulatory changes in these states may significantly impact the company’s overall performance.

Increase in special mention loans, indicating potential future credit issues.

As of September 30, 2024, the company's special mention loans rose to $38.2 million, an increase of $7.4 million from the previous quarter. This increase indicates potential future credit issues, as special mention loans are those that may have potential weaknesses that could affect repayment.

First Mid Bancshares, Inc. (FMBH) - SWOT Analysis: Opportunities

Expansion into new markets or regions to diversify the customer base

First Mid Bancshares, Inc. operates in a variety of states including Illinois, Missouri, Texas, and Wisconsin, with plans to expand its footprint further. The company has a total asset base of approximately $7.6 billion as of Q3 2024, positioning it well for market expansion. This expansion could be facilitated by their existing loan production office in the greater Indianapolis area, targeting potential growth in the Midwest region.

Continued growth in wealth management services, leveraging strong performance

Wealth management revenues for First Mid increased to $5.8 million in Q3 2024, up from $4.9 million in Q3 2023, reflecting a growth rate of 16.6% year-over-year. The company currently manages approximately $6.4 billion in assets, indicating significant potential for continued growth in this sector as they enhance their service offerings to attract a broader clientele.

Potential for increasing interest rates to enhance net interest margins further

As of Q3 2024, First Mid's net interest margin was reported at 3.35%, reflecting a year-over-year increase of 29 basis points. The average rate on interest-earning assets stood at 5.35%, while the average cost of funds increased to 2.00%. An anticipated rise in interest rates could further boost net interest income, which was $57.5 million for Q3 2024, an increase of 14.1% compared to the previous year.

Opportunities for strategic acquisitions to enhance service offerings and market presence

First Mid has been active in pursuing strategic acquisitions, as evidenced by the addition of Blackhawk and the acquisition of Mid Rivers Insurance Group in July 2024. The integration of these entities is expected to enhance service offerings and market presence, contributing to a diversified portfolio and increased revenue streams.

Development of digital banking services to attract younger demographics

To cater to younger demographics, First Mid is focusing on enhancing its digital banking services. As of Q3 2024, the bank reported a total of 1,207 full-time equivalent employees, which includes personnel dedicated to technological advancements. This investment in digital infrastructure aims to provide a seamless banking experience, thus appealing to tech-savvy clients and expanding their customer base.

First Mid Bancshares, Inc. (FMBH) - SWOT Analysis: Threats

Economic downturns affecting loan performance and credit quality

The potential for economic downturns poses a significant threat to First Mid Bancshares, Inc. (FMBH). As of September 30, 2024, the company reported a non-performing loans ratio of 0.32% of total loans, with an allowance for credit losses (ACL) ratio of 1.22%. Economic instability can lead to increased defaults, impacting both loan performance and overall credit quality, which may strain financial metrics and investor confidence.

Increased competition from larger banks and fintech companies in the financial services space

FMBH faces intensified competition from both larger banking institutions and emerging fintech companies. The bank's total assets stood at approximately $7.58 billion as of September 30, 2024. The competitive landscape is shifting as fintech companies continue to attract younger customers with innovative services, potentially eroding market share and compressing margins for traditional banks like FMBH.

Regulatory changes that could impact profitability and operational flexibility

Changes in regulatory frameworks could pose a threat to FMBH’s profitability and operational flexibility. The company operates under several regulatory standards that govern capital requirements and lending practices. For instance, as of Q3 2024, FMBH maintained a total capital ratio of 15.24%, which is above the “well capitalized” threshold. However, any tightening of regulations could necessitate higher capital reserves, limiting the bank's ability to lend and grow its portfolio.

Rising interest rates may lead to increased borrowing costs for customers, affecting loan demand

As interest rates continue to rise, FMBH may encounter challenges related to loan demand. The average cost of funds for the bank increased to 2.00% in the third quarter of 2024. Higher borrowing costs could deter customers from seeking loans, which could negatively impact revenue from interest income, which was reported at $91.18 million for the same period. This trend could lead to a slowdown in loan growth, currently at 1% quarter-over-quarter.

Cybersecurity threats that could jeopardize customer trust and operational integrity

Cybersecurity remains a critical threat for financial institutions, including FMBH. With the increasing frequency of cyberattacks targeting banks, any breach could severely damage customer trust and operational integrity. In 2024, FMBH has invested in enhancing its cybersecurity infrastructure; however, the evolving nature of cyber threats means that continuous vigilance and investment are necessary to protect sensitive customer data.

In summary, the SWOT analysis of First Mid Bancshares, Inc. (FMBH) reveals a company with solid financial performance and growth opportunities, particularly in wealth management and potential market expansions. However, it also faces challenges, including economic uncertainties and competitive pressures. By leveraging its strengths and addressing weaknesses, FMBH can strategically position itself to navigate the evolving financial landscape and capitalize on emerging opportunities.

Article updated on 8 Nov 2024

Resources:

1. First Mid Bancshares, Inc. (FMBH) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of First Mid Bancshares, Inc. (FMBH)' financial performance, including balance sheets, income statements, and cash flow statements.
2. SEC Filings – View First Mid Bancshares, Inc. (FMBH)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.