8-K: First Mid Bancshares to Acquire Two Rivers Financial

First Mid Bancshares, Inc. announced a definitive agreement to acquire Two Rivers Financial Group, Inc. in an all-stock transaction valued at approximately $94.1 million.

Summary

• First Mid Bancshares, Inc. (First Mid) will acquire Two Rivers Financial Group, Inc. (Two Rivers) in a 100% stock transaction.
• Two Rivers shareholders will receive 1.225 shares of First Mid common stock for each share of Two Rivers common stock.
• The aggregate consideration is approximately $94.1 million, based on First Mid's closing price of $36.80 on October 28, 2025.
• Approximately 2,556,140 shares of First Mid common stock will be issued to Two Rivers shareholders and equity award holders.
• Two Rivers Bank & Trust, a wholly-owned subsidiary of Two Rivers, will merge into First Mid Bank & Trust, N.A. following the main merger.
• As of September 30, 2025, Two Rivers Bank had total consolidated assets of approximately $1.1 billion, loans of $901 million, and total deposits of $988 million.
• The transaction is expected to be approximately 12.3% accretive to First Mid's earnings per share in 2027.
• Estimated tangible book value per share dilution to First Mid is expected to be earned back in 2.1 years.
• First Mid anticipates achieving cost savings of approximately 27% of Two Rivers' noninterest expense.
• The merger is expected to close in the first quarter of 2026, subject to regulatory and Two Rivers shareholder approvals.
• Certain directors and officers of Two Rivers have signed voting agreements to approve the merger.

Sentiment

Score: 8

Explanation: The filing presents a highly positive outlook for the merger, emphasizing significant EPS accretion, a short earn-back period for tangible book value dilution, substantial cost savings, and strategic market expansion. Management comments are optimistic, and the financial metrics provided support a strong pro forma entity. While integration risks exist, they are framed as manageable by an experienced acquirer.

Positives

• The transaction is estimated to be approximately 12.3% accretive to First Mid's earnings per share in 2027.
• Tangible book value per share dilution is expected to be earned back in a short period of 2.1 years.
• Significant cost savings of approximately 27% of Two Rivers' noninterest expense are anticipated.
• The acquisition expands First Mid's presence into attractive Iowa markets, providing geographic diversification.
• Two Rivers is described as a high-quality community bank with a low-cost, core deposit engine (93% core deposits, 1.93% Q3 Cost of Total Deposits).
• The pro forma CET1 ratio is expected to remain strong at approximately 12.8%.
• The merger is strategically compelling, accelerating scale and market reach with ~$9 billion in pro forma assets and ~$8 billion in wealth AUM.
• Shane Zimmerman, CEO and President of Two Rivers Bank & Trust, will join First Mid as an Executive Vice President and Divisional President, ensuring leadership continuity.

Negatives

• The transaction will result in tangible book value per share dilution of approximately 4.3% (excluding CECL double count).
• One-time pre-tax merger expenses are estimated at $14.5 million.
• Integration of operations could be materially delayed, more costly, or difficult than expected.
• The possibility that anticipated benefits, including cost savings and revenue synergies, may not be realized within the expected time period.

Risks

• The possibility that any of the anticipated benefits of the proposed transactions will not be realized within the expected time period.
• The risk that integration of the operations of Two Rivers with First Mid will be materially delayed or will be more costly or difficult than expected.
• The inability to complete the proposed transactions due to the failure to satisfy conditions, including required regulatory, shareholder, and other approvals.
• The failure of the proposed transactions to close for any other reason.
• The effect of the announcement of the proposed transactions on customer relationships and operating results.
• The possibility that the proposed transactions may be more expensive to complete than anticipated, including as a result of unexpected factors or events.
• Changes in interest rates, general economic conditions, and conditions in the market areas of First Mid and Two Rivers.
• Legislative and/or regulatory changes, and monetary and fiscal policies of the U.S. Government.
• The quality or composition of First Mid's and Two Rivers' loan or investment portfolios and the valuation of those investment portfolios.
• Demand for loan products, deposit flows, and competition in the market areas.
• Changes in accounting principles, policies, and guidelines.

Future Outlook

The merger is anticipated to close in the first quarter of 2026, with system conversion expected in late Q2 2026. First Mid projects the transaction to be approximately 12.3% accretive to its earnings per share in 2027 and expects to earn back tangible book value per share dilution within 2.1 years. The combined entity aims to leverage a strong capital position and achieve significant cost savings, while also exploring revenue synergies not yet modeled.

Management Comments

• Joseph R. Dively, Chairman and CEO of First Mid, stated, "This partnership is an exciting step forward for our organization as we expand into a neighboring state, demonstrating our commitment to continued growth and geographic diversification."
• Frank Delaney, Chairman and Interim CEO of Two Rivers Financial Group, commented, "We are pleased to announce that we are entering into a merger with an organization that not only brings strong financial performance and scale, but one that also shares our deep commitment to community banking. Partnering with First Mid aligns with our core values and will position us to serve our customers even more effectively."
• Shane Zimmerman, CEO and President of Two Rivers Bank & Trust, added, "The institution we're joining has a proven track record of excellence and stability, and like us, they believe in building lasting relationships, supporting local communities, and taking a long-term view. Together, we will remain focused on what matters most—our people, our customers, and the communities we proudly serve."

Industry Context

This acquisition represents a continuation of the consolidation trend within the U.S. banking sector, particularly among regional and community banks seeking to achieve greater scale, expand geographic reach, and enhance profitability through cost synergies and diversified service offerings. The focus on entering attractive, growing markets and leveraging a strong core deposit base aligns with common strategic objectives in a competitive and evolving financial landscape.

Comparison to Industry Standards

• The transaction's estimated 12.3% EPS accretion for 2027 and 2.1-year tangible book value per share earnback are presented as attractive, suggesting favorable metrics compared to typical bank M&A deals.
• First Mid's disciplined pricing at 104% of tangible book value and 8.5x 2026E EPS, combined with a 'below market' TBV earnback, indicates a valuation that is competitive or advantageous relative to industry benchmarks.
• Two Rivers' 93% core deposits and 1.93% Q3 Cost of Total Deposits highlight a strong, low-cost funding profile, which is a desirable characteristic in the current banking environment and compares favorably to many industry peers.
• First Mid's track record of 6 whole-bank acquisitions over the last 10 years demonstrates a proven execution capability in M&A, suggesting a higher likelihood of successful integration compared to less experienced acquirers.

Management Changes

Corporate Governance

Legal Proceedings

• No new material claims, actions, suits, or proceedings are pending or threatened against First Mid or Two Rivers, or their subsidiaries, that would materially affect the merger or their respective businesses, beyond what is disclosed in SEC filings.

Related Party Transactions

• No executive officer or director of Two Rivers or any subsidiary, principal shareholder, or immediate family member has any loan, deposit account, or other agreement or arrangement with Two Rivers or any subsidiary, or any interest in any material property used in the business, except for ordinary and customary loans and deposits that comply with applicable banking regulations.

Stakeholder Impact

• **Shareholders (Two Rivers):** Will receive First Mid common stock, converting their investment into shares of a larger, more diversified entity with expected EPS accretion.
• **Shareholders (First Mid):** Expected to benefit from EPS accretion, strategic market expansion, and cost synergies, though with initial tangible book value dilution.
• **Employees (Two Rivers):** Key leadership, like Shane Zimmerman, will join First Mid. Other employees will either continue under Company Benefit Plans or become eligible for First Mid's plans, with provisions for service credit and severance for qualifying involuntary terminations.
• **Customers (Two Rivers):** Expected to benefit from expanded financial services, broader commercial lending, treasury, insurance, and wealth management solutions offered by the larger First Mid platform.
• **Communities (Two Rivers):** The merger is framed as maintaining a deep commitment to community banking, suggesting continued local presence and support.

Next Steps

• First Mid will file a registration statement on Form S-4 with the SEC, including a proxy statement for Two Rivers shareholders.
• Two Rivers shareholders will hold a meeting to approve the merger.
• Regulatory approvals from appropriate governmental authorities must be obtained.
• The merger is anticipated to close in the first quarter of 2026.
• Two Rivers Bank & Trust will merge into First Mid Bank & Trust, N.A. at a date following the completion of the main merger.
• The Company will cause the termination of its Employee Stock Ownership Plan (ESOP) no later than the Closing Date and file for an IRS determination letter.

Key Dates

Recommendation

The acquisition of Two Rivers Financial Group by First Mid Bancshares presents a compelling strategic and financial opportunity. The projected 12.3% EPS accretion for 2027, coupled with a rapid 2.1-year tangible book value earnback, indicates a highly accretive transaction. The anticipated 27% cost savings and the expansion into attractive Iowa markets provide clear pathways for enhanced profitability and growth. First Mid's proven track record in M&A and the cultural alignment with Two Rivers suggest a high probability of successful integration. The robust pro forma capital position further strengthens the investment thesis. This merger is a strong positive catalyst for First Mid's stock.

Keywords

Bank Merger, Acquisition, Financial Services, Community Banking, Stock Transaction, Earnings Per Share Accretion, Tangible Book Value, Iowa Markets, Deposit Growth, Wealth Management, Regulatory Approval, Shareholder Approval