FIRST MID BANCSHARES, INC. (FMBH) stock intrinsic value fair value estimate & owner earnings analysis

First Mid Bancshares is the holding company for First Mid Bank & Trust, a community bank based in Mattoon, Illinois, with 76 banking offices at the end of 2025 (54 in Illinois, 18 in Missouri, 3 in Wisconsin, 1 in Texas), plus an insurance agency and a trust and wealth-management business. At June 30, 2026 it had $9.2 billion of assets, $7.6 billion of deposits and $1.10 billion of shareholders' equity. After $273 million of goodwill and acquired intangibles, tangible book value is about $31.15 a share (book value $41.43). Loans were $6.0 billion at the end of 2025: $2.58 billion of commercial real estate (43% of loans), $4.15 billion secured by real estate overall (69%), $1.39 billion of commercial and industrial loans and $307 million of agricultural loans. What changed since the last analysis: in February 2026 First Mid completed its purchase of Two Rivers Financial Group of Iowa for about 2.56 million new shares, lifting the share count from 24.0 million to 26.6 million and assets from $8.0 billion to $9.2 billion. First-half 2026 net income was $54.1 million against $45.6 million a year earlier, or $2.10 per diluted share against $1.90, so the larger share count has not diluted per-share results. A new chief executive took over on July 1, 2026. The figures in our previous analysis were built on a different earnings measure and payout treatment, so they are not comparable with the figures below. How we measure earnings. For a bank, what belongs to shareholders is what is left after interest and after credit losses. We start from operating cash flow, strip out swings in loans held for sale, accrued interest, other assets and liabilities and deferred taxes, deduct stock compensation and the (small) maintenance capital spending, and treat the provision for credit losses as a real recurring cost rather than a non-cash add-back. Amortization of acquired intangibles ($12.4 million in 2025) is added back as a sunk acquisition cost; the risk that acquisitions do not keep paying is carried in the growth path and the bear case. On this basis owner earnings per diluted share went from $2.64 in 2016 to $4.07 in 2025, about 5% a year, with two dips: 2020 ($2.92, when credit provisions reached $16.1 million) and 2023 ($3.39, down 9.6% from $3.75, when deposit costs rose and the net interest margin fell to 3.05%). The 2023 operating cash flow was inflated by a $16.7 million deferred-tax item that was offset by a $20.6 million rise in other assets, so we removed deferred-tax timing in every year rather than let one year look better than it was. Reported earnings per share ($3.83 in 2025) are lower than our $4.07 partly because of that intangible amortization. Normal earnings level: the median of 2020 to 2025, $3.56 per share. That window contains the 2020-21 credit provisions, near-zero rates, the 2023 funding squeeze and the 2024-25 recovery, so it is a full cycle for a bank. We did not use the latest 12 months. For 2026 the base case assumes owner earnings of $3.92 (10% above the normal level). Actual growth in 2025 was +11.1%, and first-half 2026 earnings per share are up about 10%, so the assumption is at or below the trailing record. The net interest margin rose to 3.70% in 2025 from 3.34% in 2024 and 3.05% in 2023 (net interest income $256.2 million against $228.7 million), mainly from repricing loans and lower funding costs. The company's own simulation shows net interest income falling only about 2% if rates dropped 200 basis points, so the margin does not depend on the level of rates, but we give no credit for further widening. Growth credited: only organic growth of the existing franchise, which is a repeating process (loans grew 6% in 2025 with no bank acquisition). The base case credits 3% a year through 2030, 2.5% through 2035, 2% through 2040, 1% through 2045 and nothing after that, all below the pace shown. Growth needs capital, so each year we hold back growth times tangible book per share (about $0.9 to $1.1 a share) and count only the remainder as payable to owners. Not credited: further acquisitions (First Mid has done one every one to three years, but each is large, Two Rivers added about 11% to the share count, so they are bets rather than small repeatable steps), margin expansion, fee growth and share gains. Base case, $72.65 a share. Owner earnings rise from $3.92 (2026) to $4.99 (2035). It includes a moderate credit downturn in 2029-30 sized on 2020-21, with provisions about 0.35% of loans a year above normal (about $0.72 a share each year), taking earnings to $3.56 in 2029, and a similar average drag of about $0.12 a share a year after 2035. After about 2045 the deposit franchise is assumed to keep earning at the level reached with no further growth, because customer deposits and local lending relationships are the structural feature that persists; about two-thirds of the value comes from years after 2035, which is the main sensitivity. As a bank, no debt is subtracted: deposits and borrowings are the raw material and interest is already deducted from earnings. That includes roughly $57 million of holding-company subordinated and trust-preferred debt (about $2 a share), whose interest is already in the earnings figures. Bear case, $48.28 a share. Earnings stay at the $3.56 normal level with no uplift, and a full credit cycle starts in 2027, modelled on 2008-2010. Industry-wide net charge-offs were about 2.5% of loans in both 2009 and 2010 (FDIC); First Mid's own were 0.24% and 0.35% (net charge-offs of $1.7 million and $2.8 million on roughly $0.7-0.8 billion of loans, with earnings per share steady at $1.04 and $1.07, per its January 2011 earnings release). We take roughly the midpoint, because today's book is roughly eight times larger and 43% commercial real estate: provisions of 0.80%, 1.50%, 1.50%, 0.90% and 0.40% of loans in 2027-2031 against a normal 0.20%, on an assumed loan book of about $7.0 billion (not directly reported in the data we used). The extra loss is about $287 million before tax, $224 million after tax or $8.42 a share. Earnings before credit costs also fall 8% in 2027, 10% in 2028-29 (about the size of the 2023 squeeze) and 5% in 2030. Owner earnings bottom at $0.54 a share in 2028 and 2029, still positive, so we assume no capital raise; tangible equity of about 9% of assets absorbs the loss, though the dividend would likely be cut. Growth is zero through 2030, 1.5% to 2035, 0.5% to 2040, then flat, and a second severe cycle every 15 years costs about $0.56 a share a year after 2035. This is above tangible book of $31.15 because after the cycle the bank again earns $3.2 to $3.8 a share, about 10% on tangible book, so the franchise is worth more than its capital even after a bad cycle. Bull case, $91.30 a share. The 3.70% margin proves durable (first-half 2026 earnings annualize to about $4.20 a share), so 2026 owner earnings start near $4.30; the roughly $105 million of unrealized securities losses carried in equity give room for higher yields as those bonds mature and are reinvested. Organic growth runs at 5% through 2030, 4% through 2035, 3% through 2040 and 2% through 2045, with no credit cycle in the next decade and only the modest average drag afterwards. Breaking the case: we tested the margin and the 2023 cash flow, as described above. What would make this wrong: loan losses worse than the bear case (commercial real estate is the largest exposure), a second margin squeeze, a poorly priced acquisition, an unsettled leadership transition, or a franchise that does not keep earning flat for decades. We could read the June 2026 quarter only through its reported financial data, not the full text, so Two Rivers' loan mix and merger costs are not reflected in detail. Margin-of-safety price, $26.00. We are fairly sure of the earnings level (ten years of data with two dips, the worst a 10% fall) and less sure of the margin, which is the part most likely to be wrong, and of loan losses, where today's low level is not the long-run norm. The worst plausible event is a severe real-estate and funding cycle combined; the bank survives it as modelled, with positive earnings throughout and no capital raise, but shareholders would earn little for several years. An unmodelled risk is a poorly priced acquisition paid for in stock. The price assumes a holding period of about five years, to the end of 2030. Over that period the bank pays a dividend of $1.00 a share annually ($0.25 a quarter in 2026), about $5 over five years, and retained earnings build tangible book. If the base case plays out, tangible book reaches about $45 by the end of 2030; from $26, if shares are then valued at 1.3 times tangible book (about $59, which we estimate as fair for a bank earning 12-13% on tangible equity) plus the dividends, the base case implies about 20% a year. If the bear case plays out and shares are valued at tangible book (about $35 at the end of 2030) plus dividends, the bear case implies about 9% a year. A higher price leaves the 20% depending on the base case plus a premium multiple, which is more than the analysis relies on.