FIRST MID BANCSHARES, INC. Fair Value Disclosure
Note 11 -- Disclosures of Fair Values of Financial Instruments
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs. There is a hierarchy of three levels of inputs that may be used to measure fair value:
Level 1 Valuations for assets and liabilities traded in active exchange markets, such as the New York Stock Exchange. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.
Level 2 Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third party pricing services for identical or comparable assets or liabilities which use observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in active markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Following is a description of the inputs and valuation methodologies used for assets measured at fair value on a recurring basis and recognized in the accompanying balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy.
Available-for-Sale Securities. The fair value of available-for-sale securities is determined by various valuation methodologies. Where quoted market prices are available in an active market, securities are classified within Level 1. If quoted market prices are not available, then fair values are estimated by using quoted prices of securities with similar characteristics or independent asset pricing services and pricing models, the inputs of which are market- based or independently sources market parameters, including but not limited to, yield curves, interest rates, volatilities, prepayments, defaults, cumulative loss projections and cash flows. Such securities are classified in Level 2 of the valuation hierarchy. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.
Equity Securities. The fair value of current equity securities is determined by obtaining quoted market prices in an active market and are classified within Level 1. In cases where quoted market prices are not available, fair values are estimated by using quoted prices of securities with similar characteristics and are classified in Level 2 of the valuation hierarchy.
Derivatives. The fair value of derivatives is based on models using observable market data as of the measurement date and are therefore classified in Level 2 of the valuation hierarchy.
Loans held for sale. The fair values are estimated by using quoted prices of loans with similar characteristics and are therefore classified in Level 2 of the valuation hierarchy.
The following table presents the Company’s assets that are measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall as of December 31, 2025 and 2024 (in thousands):
|
|
|
|
|
Fair Value Measurements Using: |
|
||||||||||
|
|
|
|
|
Quoted Prices in |
|
|
Significant |
|
|
Significant |
|
||||
|
|
|
|
|
Active Markets |
|
|
Other |
|
|
Unobservable |
|
||||
|
|
|
|
|
for Identical |
|
|
Observable |
|
|
Inputs |
|
||||
|
|
Fair Value |
|
|
Assets (Level 1) |
|
|
Inputs (Level 2) |
|
|
(Level 3) |
|
||||
December 31, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Available-for-sale securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies |
|
$ |
144,080 |
|
|
$ |
— |
|
|
$ |
144,080 |
|
|
$ |
— |
|
Obligations of states and political subdivisions |
|
|
280,633 |
|
|
|
— |
|
|
|
280,633 |
|
|
|
— |
|
Mortgage-backed securities |
|
|
624,666 |
|
|
|
— |
|
|
|
624,666 |
|
|
|
— |
|
Corporate bonded debt |
|
|
27,504 |
|
|
|
— |
|
|
|
24,745 |
|
|
|
2,759 |
|
Total available-for-sale securities |
|
|
1,076,883 |
|
|
|
— |
|
|
|
1,074,124 |
|
|
|
2,759 |
|
Equity securities |
|
|
4,588 |
|
|
|
4,588 |
|
|
|
— |
|
|
|
— |
|
Loans held for sale |
|
|
5,203 |
|
|
|
— |
|
|
|
5,203 |
|
|
|
— |
|
Derivative assets: interest rate swaps |
|
|
1,728 |
|
|
|
— |
|
|
|
1,728 |
|
|
|
— |
|
Total assets |
|
$ |
1,088,402 |
|
|
$ |
4,588 |
|
|
$ |
1,081,055 |
|
|
$ |
2,759 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Derivative liabilities: interest rate swaps |
|
$ |
1,247 |
|
|
$ |
— |
|
|
$ |
1,247 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
December 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Available-for-sale securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies |
|
$ |
191,358 |
|
|
$ |
— |
|
|
$ |
191,358 |
|
|
$ |
— |
|
Obligations of states and political subdivisions |
|
|
267,740 |
|
|
|
— |
|
|
|
267,740 |
|
|
|
— |
|
Mortgage-backed securities |
|
|
539,742 |
|
|
|
— |
|
|
|
539,742 |
|
|
|
— |
|
Corporate bonded debt |
|
|
64,452 |
|
|
|
— |
|
|
|
58,693 |
|
|
|
5,759 |
|
Total available-for-sale securities |
|
|
1,063,292 |
|
|
|
— |
|
|
|
1,057,533 |
|
|
|
5,759 |
|
Equity securities |
|
|
4,439 |
|
|
|
4,439 |
|
|
|
— |
|
|
|
— |
|
Loans held for sale |
|
|
6,614 |
|
|
|
— |
|
|
|
6,614 |
|
|
|
— |
|
Derivative assets: interest rate swaps |
|
|
2,949 |
|
|
|
— |
|
|
|
2,949 |
|
|
|
— |
|
Total assets |
|
$ |
1,077,294 |
|
|
$ |
4,439 |
|
|
$ |
1,067,096 |
|
|
$ |
5,759 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Derivative liabilities: interest rate swaps |
|
$ |
2,006 |
|
|
$ |
— |
|
|
$ |
2,006 |
|
|
$ |
— |
|
The change in fair value of assets measured on a recurring basis using significant unobservable inputs (Level 3) for the years ended December 31, 2025 and 2024 is summarized as follows (in thousands):
|
|
Total |
|
|
December 31, 2025 |
|
|
|
|
Beginning balance |
|
$ |
5,759 |
|
Transfers out of Level 3 |
|
|
(7,029 |
) |
Purchases |
|
|
7,029 |
|
Maturities |
|
|
(3,000 |
) |
Ending balance |
|
$ |
2,759 |
|
|
|
|
|
|
December 31, 2024 |
|
|
|
|
Beginning balance |
|
$ |
6,163 |
|
Transfers into Level 3 |
|
|
3 |
|
Maturities |
|
|
(407 |
) |
Ending balance |
|
$ |
5,759 |
|
Following is a description of the valuation methodologies used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy.
Collateral Dependent Loans
Loans for which it is probable that the Company will not collect all principal and interest due according to contractual terms are measured for impairment. Allowable methods for determining the amount of impairment and estimating fair value include using the fair value of the collateral for collateral dependent loans.
If the impaired loan is identified as collateral dependent, then the fair value method of measuring the amount of impairment is utilized. This method requires obtaining a current independent appraisal of the collateral and applying a discount factor to the value. Impaired loans that are collateral dependent are classified within Level 3 of the fair value hierarchy when impairment is determined using the fair value method.
Management establishes a specific allowance for loans that have an estimated fair value that is below the carrying value. The total carrying amount of loans for which a change in specific allowance has occurred as of December 31, 2025 was $11.0 million and a fair value of $10.4 million resulting in specific loss exposures of $605,000. As of December 31, 2024, the total carrying amount of loans for which a change specific allowance has occurred was $17.9 million. These loans had a fair value of $16.6 million which resulted in specific loss exposures of $1.3 million.
When there is little prospect of collecting principal or interest, loans, or portions of loans, may be charged-off to the allowance for credit losses. Losses are recognized in the period an obligation becomes uncollectible. The recognition of a loss does not mean that the loan has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off the loan even though partial recovery may be affected in the future.
Foreclosed Assets Held For Sale
Other real estate owned acquired through loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. The adjustment at the time of foreclosure is recorded through the allowance for credit losses. Due to the subjective nature of establishing the fair value when the asset is acquired, the actual fair value of the other real estate owned or foreclosed asset could differ from the original estimate. If it is determined that fair value declines subsequent to foreclosure, a valuation allowance is recorded through non-interest expense. Operating costs associated with the assets after acquisition are also recorded as non-interest expense. Gains and losses on the disposition of other real estate owned and foreclosed assets are netted and posted to other non-interest expense. The total carrying amount of other real estate owned as of December 31, 2025 was $2.9 million. Other real estate owned included in the total carrying amount and measured at fair value on a nonrecurring basis during the year amounted to $605,000. The total carrying amount of other real estate owned as of December 31, 2024 was $2.2 million. Other real estate owned included in the total carrying amount and measured at fair value on a nonrecurring basis during the year amounted to $48,000.
The following table presents the fair value measurement of assets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at December 31, 2025 and 2024 (in thousands):
|
|
Fair Value Measurements Using |
|
|||||||||||||
|
|
|
|
|
Quoted Prices |
|
|
|
|
|
|
|
||||
|
|
|
|
|
in Active |
|
|
Significant |
|
|
Significant |
|
||||
|
|
|
|
|
Markets for |
|
|
Other |
|
|
Unobservable |
|
||||
|
|
|
|
|
Identical Assets |
|
|
Observable Inputs |
|
|
Inputs |
|
||||
|
|
Fair Value |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
||||
December 31, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Collateral dependent loans |
|
$ |
10,389 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
10,389 |
|
Foreclosed assets held for sale |
|
|
605 |
|
|
|
— |
|
|
|
— |
|
|
|
605 |
|
December 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Collateral dependent loans |
|
$ |
16,604 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
16,604 |
|
Foreclosed assets held for sale |
|
|
48 |
|
|
|
— |
|
|
|
— |
|
|
|
48 |
|
Sensitivity of Significant Unobservable Inputs
The following table presents quantitative information about unobservable inputs used in Level 3 fair value measurements other than goodwill at December 31, 2025.
|
|
Fair Value |
|
|
Valuation |
|
|
|
Range |
|||
|
|
(in thousands) |
|
|
Technique |
|
Unobservable Inputs |
|
(Weighted Average) |
|||
Collateral dependent loans |
|
$ |
10,389 |
|
|
Third party valuations |
|
Discount to reflect realizable value |
|
0% - 40% |
|
(20%) |
Foreclosed assets held for sale |
|
|
605 |
|
|
Third party valuations |
|
Discount to reflect realizable value less estimated selling costs |
|
0% - 40% |
|
(35%) |
The following table presents quantitative information about unobservable inputs used in Level 3 fair value measurements other than goodwill at December 31, 2024.
|
|
Fair Value |
|
|
Valuation |
|
|
|
Range |
|||
|
|
(in thousands) |
|
|
Technique |
|
Unobservable Inputs |
|
(Weighted Average) |
|||
Collateral dependent loans |
|
$ |
16,604 |
|
|
Third party valuations |
|
Discount to reflect realizable value |
|
0% - 40% |
|
(20%) |
Foreclosed assets held for sale |
|
|
48 |
|
|
Third party valuations |
|
Discount to reflect realizable value less estimated selling costs |
|
0% - 40% |
|
(35%) |
The following tables present estimated fair values of the Company’s financial instruments at December 31, 2025 and 2024 (in thousands):
|
|
Carrying |
|
|
Fair |
|
|
|
|
|
|
|
|
|
|
|||||
|
|
Amount |
|
|
Value |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|||||
December 31, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Financial assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and due from banks |
|
$ |
254,844 |
|
|
$ |
254,844 |
|
|
$ |
254,844 |
|
|
$ |
— |
|
|
$ |
— |
|
Federal funds sold |
|
|
76 |
|
|
|
76 |
|
|
|
76 |
|
|
|
— |
|
|
|
— |
|
Certificates of deposit investments |
|
|
1,740 |
|
|
|
1,740 |
|
|
|
— |
|
|
|
1,740 |
|
|
|
— |
|
Available-for-sale securities |
|
|
1,076,883 |
|
|
|
1,076,883 |
|
|
|
— |
|
|
|
1,074,124 |
|
|
|
2,759 |
|
Held-to-maturity securities |
|
|
2,288 |
|
|
|
2,288 |
|
|
|
2,288 |
|
|
|
— |
|
|
|
— |
|
Equity securities |
|
|
4,588 |
|
|
|
4,588 |
|
|
|
4,588 |
|
|
|
— |
|
|
|
— |
|
Loans held for sale |
|
|
5,203 |
|
|
|
5,203 |
|
|
|
— |
|
|
|
5,203 |
|
|
|
— |
|
Loans net of allowance for credit losses |
|
|
5,931,296 |
|
|
|
5,761,258 |
|
|
|
— |
|
|
|
— |
|
|
|
5,761,258 |
|
Interest receivable |
|
|
39,949 |
|
|
|
39,949 |
|
|
|
— |
|
|
|
39,949 |
|
|
|
— |
|
Federal Reserve Bank stock |
|
|
19,855 |
|
|
|
19,855 |
|
|
|
— |
|
|
|
19,855 |
|
|
|
— |
|
Federal Home Loan Bank stock |
|
|
11,351 |
|
|
|
11,351 |
|
|
|
— |
|
|
|
11,351 |
|
|
|
— |
|
Financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Deposits |
|
$ |
6,395,273 |
|
|
$ |
6,322,439 |
|
|
$ |
— |
|
|
$ |
5,265,780 |
|
|
$ |
1,056,659 |
|
Securities sold under agreements to repurchase |
|
|
196,716 |
|
|
|
196,716 |
|
|
|
— |
|
|
|
196,716 |
|
|
|
— |
|
Interest payable |
|
|
5,782 |
|
|
|
5,782 |
|
|
|
— |
|
|
|
5,782 |
|
|
|
— |
|
Federal Home Loan Bank borrowings |
|
|
270,000 |
|
|
|
270,338 |
|
|
|
— |
|
|
|
270,338 |
|
|
|
— |
|
Subordinated debentures |
|
|
60,008 |
|
|
|
60,800 |
|
|
|
— |
|
|
|
60,800 |
|
|
|
— |
|
Junior subordinated debentures |
|
|
24,454 |
|
|
|
22,083 |
|
|
|
— |
|
|
|
22,083 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
December 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Financial assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and due from banks |
|
$ |
121,141 |
|
|
$ |
121,141 |
|
|
$ |
121,141 |
|
|
$ |
— |
|
|
$ |
— |
|
Federal funds sold |
|
|
75 |
|
|
|
75 |
|
|
|
75 |
|
|
|
— |
|
|
|
— |
|
Certificates of deposit investments |
|
|
3,500 |
|
|
|
3,500 |
|
|
|
— |
|
|
|
3,500 |
|
|
|
— |
|
Available-for-sale securities |
|
|
1,063,292 |
|
|
|
1,063,292 |
|
|
|
— |
|
|
|
1,057,533 |
|
|
|
5,759 |
|
Held-to-maturity securities |
|
|
2,279 |
|
|
|
2,279 |
|
|
|
2,279 |
|
|
|
— |
|
|
|
— |
|
Equity securities |
|
|
4,439 |
|
|
|
4,439 |
|
|
|
4,439 |
|
|
|
— |
|
|
|
— |
|
Loans held for sale |
|
|
6,614 |
|
|
|
6,614 |
|
|
|
— |
|
|
|
6,614 |
|
|
|
— |
|
Loans net of allowance for credit losses |
|
|
5,595,666 |
|
|
|
5,314,756 |
|
|
|
— |
|
|
|
— |
|
|
|
5,314,756 |
|
Interest receivable |
|
|
38,639 |
|
|
|
38,639 |
|
|
|
— |
|
|
|
38,639 |
|
|
|
— |
|
Federal Reserve Bank stock |
|
|
19,855 |
|
|
|
19,855 |
|
|
|
— |
|
|
|
19,855 |
|
|
|
— |
|
Federal Home Loan Bank stock |
|
|
9,501 |
|
|
|
9,501 |
|
|
|
— |
|
|
|
9,501 |
|
|
|
— |
|
Financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Deposits |
|
$ |
6,057,096 |
|
|
$ |
5,977,113 |
|
|
$ |
— |
|
|
$ |
5,069,853 |
|
|
$ |
907,260 |
|
Securities sold under agreements to repurchase |
|
|
204,122 |
|
|
|
204,122 |
|
|
|
— |
|
|
|
204,122 |
|
|
|
— |
|
Interest payable |
|
|
5,280 |
|
|
|
5,280 |
|
|
|
— |
|
|
|
5,280 |
|
|
|
— |
|
Federal Home Loan Bank borrowings |
|
|
242,520 |
|
|
|
240,125 |
|
|
|
— |
|
|
|
240,125 |
|
|
|
— |
|
Subordinated debentures |
|
|
87,472 |
|
|
|
86,062 |
|
|
|
— |
|
|
|
86,062 |
|
|
|
— |
|
Junior subordinated debentures |
|
|
24,280 |
|
|
|
21,411 |
|
|
|
— |
|
|
|
21,411 |
|
|
|
— |
|
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Feb 28, 2025 | |
| 2023 | Mar 6, 2024 | |
| 2022 | Mar 3, 2023 | |
| 2021 | Mar 2, 2022 | |
| 2020 | Mar 8, 2021 | |
| 2019 | Mar 9, 2020 | |
| 2018 | Mar 5, 2019 | |
| 2017 | Mar 2, 2018 | |
| 2016 | Mar 6, 2017 | |
| 2015 | Mar 4, 2016 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.