[PERIOD-TYPE] 12-MOS
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from_________________to_________________
Commission file number: 0-13368
First Mid-Illinois Bancshares, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 37-1103704
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1515 Charleston Avenue, Mattoon, Illinois 61938
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: 217-234-7454
Securities registered pursuant to Section 12(g) of the Act:
Title of each class Name of each exchange on which registered
NONE
Securities registered pursuant to Section 12(g) of the Act:
Common stock, par value $4.00 per share
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
State the aggregate market value of the voting stock held by non-affiliates of
the Registrant. The aggregate market value shall be computed by reference to
the price at which the stock sold, or the average bid and asked prices of such
stock, as of a specified date within 60 days prior to the date of filing:
$30,568,060 as of March 20, 1996. Based on the last reported price of an
actual transaction in Registrant's common stock on March 20, 1996, and reports
of beneficial ownership filed by the directors and executive officers of
Registrant and by beneficial owners of more than 5% of the outstanding shares
of the common stock of Registrant; however, such determination of shares owned
by affiliates does not constitute an admission of affiliate status or
beneficial interest in shares of common stock of Registrant.
Indicate the number of shares outstanding of each of the Registrant's classes
of common stock, as of the latest practicable date: 898,268 shares of common
stock at March 20, 1996.
DOCUMENTS INCORPORATED BY REFERENCE
Document
Certain items of the Annual Report to Stockholders of Part of Form 10-K
the Registrant for fiscal year ended December 31, 1995
Proxy Statement for the Annual Meeting of Parts II and III
Stockholders to be held May 15, 1996,
excluding the sections marked "Board Compensation
Committee Report" and "Comparative Stock
Performance"
Index to Exhibits is in Item 14(a)(3) on page 34 Part III
This report consists of 89 pages.
FIRST MID-ILLINOIS BANCSHARES, INC.
FORM 10-K
DOCUMENTS INCORPORATED BY REFERENCE
CROSS REFERENCE SHEET
As indicated above, certain items are incorporated by reference to the
particular statements, schedules, footnotes and discussions contained in the
Registrant's Annual Report to Stockholders for the fiscal year ended December
31, 1995 (the "1995 Annual Report") and in the Proxy Statement for the Annual
Meeting of Stockholders to be held on May 15, 1996 (the "1996 Proxy
Statement"), copies of which are included as exhibits hereto.
1995 1996
Annual Report Proxy Statement Form 10-K
Page Number Page Number Page Number
Part I
Item 1. Business 4 - 15
Item 2. Properties 27 - 29
Item 3. Legal Proceedings 29
Item 4. Submission of Matters to a
Vote of Security Holders 29
Part II
Item 5. Market for Registrant's Common
Equity and Related Stockholder
Matters 29 29
Item 6. Selected Financial Data 1 30
Item 7. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 25 - 29 30
Item 8. Financial Statements and
Supplementary Data 10 - 22 30
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosures 30
Part III
Item 10. Directors and Executive Officers
of the Registrant 30 - 31
Item 11. Executive Compensation 5 31
Item 12. Security Ownership of Certain
Beneficial Owners and Management 8 31
Item 13. Certain Relationships and
Related Transactions 16 - 17 4 32
Part IV
Item 14. Exhibits, Financial Statement
Schedules Reports on Form 8-K 32
PART I
Item 1. Business
First MId-Illinois Bancshares, Inc. (the "Registrant") is a bank holding
company engaged in the business of banking through its wholly owned
subsidiaries, First Mid-Illinois Bank & Trust, N.A. ("First Mid Bank") and
Heartland Savings Bank ("Heartland"). First Mid Bank and Heartland are
referred to as the "Bank Subsidiaries".
In addition to engaging in banking activities, the Registrant also
engages in certain other additional activities through Mid-Illinois Data
Services, Inc., a wholly owned corporation organized on March 25, 1987, as a
non-banking subsidiary ("MIDS"). The primary business of MIDS is to provide
financial data processing services to the Registrant and the Bank
Subsidiaries.
The Registrant, a Delaware corporation, was incorporated on September 8,
1981, pursuant to the approval of the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board") and became the holding company
owning all of the outstanding stock of First National Bank, Mattoon ("First
National") on June 1, 1982. The Registrant acquired all of the outstanding
stock of a number of community banks on the following dates: Mattoon Bank,
Mattoon ("Mattoon Bank") on April 2, 1984; State Bank of Sullivan ("Sullivan
Bank") on April 1, 1985; Cumberland County National Bank in Neoga ("Cumberland
County") on December 31, 1985; First National Bank and Trust Company of
Douglas County ("Douglas County") on December 31, 1986; and Charleston
Community Bank ("Charleston Bank") on December 30, 1987. In April 1989, a
purchase and assumption agreement was executed between First National and
Mattoon Bank whereby First National purchased substantially all of the assets
and assumed all of the liabilities of Mattoon Bank. On May 31, 1992, the
Company merged Sullivan Bank, Cumberland County, Douglas County and Charleston
Bank into First National. First National changed its name at that time to
First Mid-Illinois Bank & Trust, N.A..
On October 4, 1994, First Mid Bank acquired all of the outstanding stock
of Downstate Bancshares, Inc. ("DBI") which owned 100% of the stock of
Downstate National Bank ("DNB"). DNB operated branch locations in Altamont
and Effingham, Illinois. Immediately following the acquisition, DBI was
dissolved and DNB was merged with and into First Mid Bank with First Mid Bank
being the surviving entity.
DBI was purchased for cash in the amount of $8.6 million with $5.6
million of that amount being internally generated funds and $3 million from
additional long-term borrowings of the Registrant. The acquisition of DBI by
First Mid Bank was accounted for using the purchase method of accounting.
Accordingly, the assets and liabilities of DBI were recorded at their fair
values as of the acquisition date.
On July 1, 1992, the Registrant acquired and recapitalized Heartland, a
$125 million thrift headquartered in Mattoon with offices in Charleston,
Sullivan and Urbana, Illinois. Under the terms of the acquisition, Heartland
converted from the mutual form of organization into a federally chartered,
stock savings association and became a 100% owned subsidiary of the
Registrant.
Following that reorganization and immediately before the Heartland
acquisition, the reorganized banking subsidiary acquired certain assets and
deposit liabilities of Heartland. The acquisition was accounted for as a
purchase and, accordingly, the operating results of Heartland have been
consolidated with those of the Registrant since July 1, 1992. In accordance
with purchase accounting requirements, the assets and liabilities of Heartland
were accounted for at their fair market values as of the acquisition date.
In connection with the Heartland acquisition, $3.1 million of Series A
perpetual, cumulative, non-voting, convertible, preferred stock was issued to
directors and certain senior officers of the Registrant pursuant to a private
placement. 620 shares of the preferred stock were sold at a stated value of
$5,000 per share with such shares bearing a dividend rate of 9.25%. The
preferred stock may be converted at any time, at the option of the preferred
stockholder, into common shares at the conversion ratio of 202.1 shares of
common stock for each share of preferred. The Registrant has the right at any
time after July 1, 1998, and upon giving at least thirty days prior notice, to
redeem all (but not less than all) of the preferred stock at a cash value of
$5,000 per share plus any accrued but unpaid dividends. The Registrant also
has the right at any time after July 1, 1998, and upon giving at least thirty
days prior notice to require the conversion of all (but not less than all) of
the preferred stock into common stock at the conversion ratio.
In December 1994, Heartland (formerly known as Heartland Federal Savings
and Loan Association) converted from a federally chartered stock savings
association to a state chartered savings bank and changed its name to
Heartland Savings Bank.
The Bank Subsidiaries
The Bank Subsidiaries conduct a general banking business embracing most
of the services, both consumer and commercial, which banks may lawfully
provide, including the following principal services: the acceptance of
deposits to demand, savings and time accounts and the servicing of such
accounts; commercial, industrial, agricultural, consumer and real estate
lending, including installment, credit card, personal lines of credit and
overdraft protection; safe deposit box operations; and an extensive variety of
additional services tailored to the needs of customers, such as traveler's
checks and cashiers' checks, foreign currency, and other special services.
First Mid Bank also provides services to its customers through its trust
department and investment center.
Loans, both commercial and consumer, are serviced on either a secured or
unsecured basis to corporations, partnerships and individuals. Commercial
lending covers such categories as business, industry, capital, construction,
agriculture, inventory and real estate, with the latter including residential
properties. The Bank Subsidiaries' installment loan departments make direct
loans to consumers and some commercial customers, and purchase retail
obligations from retailers, primarily without recourse.
The Bank Subsidiaries conduct their businesses in the middle of some of
the richest farmland in the world. Accordingly, the Bank Subsidiaries provide
a wide range of financial services to farmers and agribusiness within their
respective markets. The farm management department, headquartered in Mattoon,
Illinois, has approximately 32,000 acres under management and is the largest
management operation in the area, ranking in the top 100 firms nationwide. As
a group, the Bank Subsidiaries are the largest supplier of farm credit in the
Registrant's market area with $39.7 million in agriculture related loans at
December 31, 1995. The farm credit products offered by the Bank Subsidiaries
include not only real estate loans, but machinery and equipment loans,
production loans, inventory financing and lines of credit.
The following chart sets forth (in thousands) the assets, deposits and
stockholder's equity of the Bank Subsidiaries (before intercompany
eliminations) as of December 31, 1995, and the average deposits for the year
ended December 31, 1995:
Stockholder's Average
Assets Deposits Equity Deposits
First Mid Bank $377,805 $318,119 $33,740 $314,193
Heartland 98,520 80,750 7,871 83,174
Total $476,325 $398,869 $41,611 $397,367
The Registrant, MIDS and the Bank Subsidiaries employed 254 people on a
full-time equivalent basis as of December 31, 1995.
Pages 16 through 26 in this Report contain supplemental statistical data
which is included to comply with the requirements of the Securities and
Exchange Commission applicable to bank holding companies. This data should be
read in conjunction with the financial statements and related footnotes and
the discussion included in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included in the 1995 Annual Report.
COMPETITION
The Registrant, through its Bank Subsidiaries, actively competes in all
areas in which the Bank Subsidiaries presently do business. Each competes for
commercial and individual deposits, loans, and trust business with many east
central Illinois banks, savings and loan associations, and credit unions. The
principal methods of competition in the banking and financial services
industry are quality of services to customers, ease of access to facilities,
and pricing of services, including interest rates paid on deposits, interest
rates charges on loans, and fees charged for fiduciary and other banking
services.
The Bank Subsidiaries operate facilities in the Illinois counties of
Champaign, Coles, Cumberland, Douglas, Effingham and Moultrie. Each facility
primarily serves the community in which it is located.
First Mid Bank serves eight different communities with 13 separate
locations in the towns of Mattoon, Charleston, Neoga, Tuscola, Sullivan,
Arcola, Effingham and Altamont, Illinois and Heartland serves the two
communities of Mattoon and Urbana, Illinois. Within the area of service there
are numerous competing financial institutions and financial services
companies. Two of the major bank competitors had assets and deposits of $174
million and $23.4 billion and $154 million and $19.6 billion respectively as
of December 31, 1995.
SUPERVISION AND REGULATION
General
The growth and earnings performance of the Registrant can be affected not
only by management decisions and general economic conditions, but also by the
policies of various governmental regulatory authorities including, but not
limited to, the Office of the Comptroller of the Currency ("OCC"), the
Illinois Commissioner of Savings and Residential Finance (the "Commissioner"),
the Federal Reserve Board ("FRB"), the Federal Deposit Insurance Corporation
("FDIC"), the Internal Revenue Service and state taxing authorities and the
Securities and Exchange Commission ("SEC"). Financial institutions and their
holding companies are extensively regulated under federal and state law. The
effect of such statutes, regulations and policies can be significant, and
cannot be predicted with a high degree of certainty.
Federal and state laws and regulations generally applicable to financial
institutions, such as the Registrant and its subsidiaries, regulate, among
other things, the scope of business, investments, reserves against deposits,
capital levels relative to operations, the nature and amount of collateral for
loans, the establishment of branches, mergers, consolidations and dividends.
The system of supervision and regulation applicable to the Registrant and its
subsidiaries establishes a comprehensive framework for their respective
operations and is intended primarily for the protection of the FDIC's deposit
insurance funds and the depositors, rather than the shareholders, of financial
institutions.
The following references to material statutes and regulations affecting
the Registrant and its subsidiaries are brief summaries thereof and do not
purport to be complete, and are qualified in their entirety by reference to
such statutes and regulations. Any change in applicable law or regulations
may have a material effect on the business of the Registrant and its
subsidiaries.
Recent Regulatory Developments
On August 8, 1995, the FDIC amended its regulations to change the range
of deposit insurance assessments charged to members of the Bank Insurance Fund
(the "BIF"), such as First Mid Bank, from the then-prevailing range of .23% to
.31% of deposits, to a range of .04% to .31% of deposits. Additionally,
because the change in BIF-assessments was applied retroactively to June 1,
1995, BIF-member institutions, including First Mid Bank, received a refund of
the difference between the amount of assessments previously paid at the higher
assessment rates for the period from June 30, 1995 through September 30, 1995,
and the amount that would have been paid for that period at the new rates. In
the case of First Mid Bank, this refund totalled $170,000. The FDIC did not,
however, change the assessment rates charged to members of the Savings
Association Insurance Fund (the "SAIF"), such as Heartland, and SAIF-insured
institutions continue to pay assessments ranging from .23% to .31% of
deposits. As a result of the change in the assessment rates charged to BIF-
member institutions, Heartland currently pays significantly higher deposit
insurance assessments as a member of the SAIF than it would pay if it were
able to become a member of the BIF.
The difference between the deposit insurance assessments paid by BIF-
member institutions and those payable by SAIF-member institutions will
increase further in calendar year 1996. On November 14, 1995, the FDIC
reduced the deposit insurance assessments for BIF-member institutions by four
basis points. As a result, the range of BIF assessments for the semi-annual
assessment period commencing January 1, 1996 will be between 0% and .27% of
deposits. BIF-member institutions, such as First Mid Bank, which qualify for
the 0% assessment category will, however, still have to pay the $1000 minimum
semi-annual assessment required by federal statute.
The FDIC was able to change the range for BIF-member deposit insurance
assessments to their current levels because the ratio of the insurance
reserves of the BIF to total BIF-insured deposits exceeds the statutorily
designated reserve ratio of 1.25%. Because the SAIF does not meet this
designated reserve ratio, the FDIC is prohibited by federal law from reducing
the deposit insurance assessments charged to SAIF-member institutions to the
same levels currently charged BIF-member institutions. Legislative proposals
pending before the Congress would recapitalize the SAIF to the designated
reserve ratio by imposing a special assessment against SAIF-insured
institutions, payable in a single installment, sufficient in the aggregate to
increase the ratio of the insurance reserves of the SAIF to total SAIF-insured
deposits to 1.25%. Based upon the information currently available to the
Registrant with respect to the manner in which any such special assessment
would be calculated under the pending legislation, the Registrant estimates
that the imposition of a special assessment under the pending legislation
would result in a one-time charge to Heartland of approximately $900,000. At
such time as the SAIF meets the designated reserve ratio of 1.25%, the
assessment rates charged SAIF-member institutions could be reduced to levels
consistent with those charged to BIF-member institutions.
Legislation has also been introduced in the Congress that would, among
other things, require federal thrift institutions to convert to state or
national banks and merge the BIF and the SAIF into a single deposit insurance
fund administered by the FDIC. At this time, it is not possible to predict
whether, or in what form, any such legislation will be adopted or the impact,
if any, such legislation would have on the Registrant, First Mid Bank or
Heartland.
The Registrant
General
The Registrant, as the sole shareholder of First Mid Bank and Heartland,
is a bank holding company. As a bank holding company, the Registrant is
registered with, and is subject to regulation by, the FRB under the Bank
Holding Company Act, as amended (the "BHCA"). In accordance with FRB policy,
the Registrant is expected to act as a source of financial strength to First
Mid Bank and Heartland and to commit resources to support First Mid Bank and
Heartland in circumstances where the Registrant might not do so absent such
policy. Under the BHCA, the Registrant is subject to periodic examination by
the FRB and is required to file periodic reports of its operations and such
additional information as the FRB may require. Because Heartland is chartered
under the Illinois Savings Bank Act (the "ISBA"), the Registrant is also
subject to regulation by the Commissioner under the ISBA.
Investments and Activities
Under the BHCA, a bank holding company must obtain FRB approval before:
(i) acquiring, directly or indirectly, ownership or control of any voting
shares of another bank or bank holding company if, after such acquisition, it
would own or control more than 5% of such shares (unless it already owns or
controls the majority of such shares); (ii) acquiring all or substantially all
of the assets of another bank or bank holding company; or (iii) merging or
consolidating with another bank holding company.
Prior to September 29, 1995, the BHCA prohibited the FRB from approving
any direct or indirect acquisition by a bank holding company of more than 5%
of the voting shares, or of all or substantially all of the assets, of a bank
located outside of the state in which the operations of the bank holding
company's banking subsidiaries are principally located unless the laws of the
state in which the bank to be acquired is located specifically authorize such
an acquisition. Pursuant to amendments to the BHCA which took effect
September 29, 1995, the FRB may now allow a bank holding company to acquire
banks located in any state of the United States without regard to geographic
restrictions or reciprocity requirements imposed by state law, but subject to
certain conditions, including limitations on the aggregate amount of deposits
that may be held by the acquiring holding company and all of its insured
depository institution affiliates.
The BHCA also prohibits, with certain exceptions noted below, the
Registrant from acquiring direct or indirect ownership or control of more than
5% of the voting shares of any company which is not a bank and from engaging
in any business other than that of banking, managing and controlling banks or
furnishing services to banks and their subsidiaries, except that bank holding
companies may engage in, and may own shares of companies engaged in, certain
businesses found by the FRB to be "so closely related to banking... as to be a
proper incident thereto." Under current regulations of the FRB, the
Registrant and its non-bank subsidiaries are permitted to engage in, among
other activities, such banking-related businesses as the operation of a
thrift, sales and consumer finance, equipment leasing, the operation of a
computer service bureau, including software development, and mortgage banking
and brokerage. The BHCA does not place territorial restrictions on the
activities of non-bank subsidiaries of bank holding companies.
Federal legislation also prohibits the acquisition of "control" of a bank
or bank holding company, such as the Registrant, without prior notice to
certain federal bank regulators. "Control" is defined in certain cases as
acquisition of 10% of the outstanding shares of a bank or bank holding
company.
Capital Requirements
The FRB uses capital adequacy guidelines in its examination and
regulation of bank holding companies. If capital falls below minimum
guideline levels, a bank holding company, among other things, may be denied
approval to acquire or establish additional banks or non-bank businesses.
The FRB's capital guidelines establish the following minimum regulatory
capital requirements for bank holding companies: a risk-based requirement
expressed as a percentage of total risk-weighted assets, and a leverage
requirement expressed as a percentage of total assets. The risk-based
requirement consists of a minimum ratio of total capital to total risk-
weighted assets of 8%, of which at least one-half must be Tier 1 capital
(which consists principally of stockholders' equity). The leverage
requirement consists of a minimum ratio of Tier 1 capital to total assets of
3% for the most highly rated companies, with minimum requirements of 4% to 5%
for all others.
The risk-based and leverage standards presently used by the FRB are
minimum requirements, and higher capital levels will be required if warranted
by the particular circumstances or risk profiles of individual banking
organizations. Further, any banking organization experiencing or anticipating
significant growth would be expected to maintain capital ratios, including
tangible capital positions (I.E. Tier 1 capital less all intangible assets),
well above the minimum levels.
As of December 31, 1995, the Registrant had regulatory capital in excess
of the FRB's minimum requirements, with a risk-based capital ratio of 11.51%
and a leverage ratio of 6.24%.
Dividends
The FRB has issued a policy statement on the payment of cash dividends by
bank holding companies. In the policy statement, the FRB expressed its view
that a bank holding company experiencing earnings weaknesses should not pay
cash dividends exceeding its net income or which could only be funded in ways
that weakened the bank holding company's financial health, such as by
borrowing. Additionally, the FRB possesses enforcement powers over bank
holding companies and their non-bank subsidiaries to prevent or remedy
actions that represent unsafe or unsound practices or violations of applicable
statutes and regulations. Among these powers is the ability to proscribe the
payment of dividends by banks and bank holding companies.
In addition to the restrictions on dividends imposed by the FRB, the
Delaware General Corporation Law would allow the Registrant to pay dividends
only out of its surplus, or if the Registrant has no such surplus, out of its
net profits for the fiscal year in which the dividend is declared and/or the
preceding fiscal year.
Federal Securities Regulation
The Registrant's common stock is registered with the SEC under the
Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended ( the "Exchange Act"). Consequently, the Registrant is subject to
the information, proxy solicitation, insider trading and other restrictions
and requirements of the SEC under the Exchange Act.
The Subsidiaries
General
First Mid Bank is a national bank, chartered by the OCC under the
National Bank Act. The deposit accounts of First Mid Bank are insured by the
BIF of the FDIC, and it is a member of the Federal Reserve System. As a BIF-
insured national bank, First Mid Bank is subject to the examination,
supervision, reporting and enforcement requirements of the OCC, as the
chartering authority for national banks, and the FDIC, as administrator of the
BIF.
Heartland is an Illinois-chartered savings bank, the deposits of which
are insured by the SAIF of the FDIC. As a SAIF-insured, Illinois-chartered
savings bank, Heartland is subject to the examination, supervision, reporting
and enforcement requirements of the Commissioner, as the chartering authority
for Illinois savings banks, and the FDIC, as administrator of the SAIF.
Deposit Insurance
As FDIC-insured institutions, First Mid Bank and Heartland are required
to pay deposit insurance premium assessments to the FDIC. The amount each
institution pays for FDIC deposit insurance coverage is determined in
accordance with a risk-based assessment system under which all insured
depository institutions are placed into one of nine categories and assessed
insurance premiums based upon their level of capital and supervisory
evaluation. Institutions classified as well-capitalized (as defined by the
FDIC) and considered healthy pay the lowest premium while institutions that
are less than adequately capitalized (as defined by the FDIC) and considered
of substantial supervisory concern pay the highest premium. For the semi-
annual assessment period ended December 31, 1995, BIF assessments ranged from
0.04% to 0.31% of deposits, while SAIF assessments ranged from 0.23% to 0.31%
of deposits. The premiums currently paid by Heartland for membership in the
SAIF are substantially higher than the premiums currently paid by First Mid
Bank for membership in the BIF. See "Recent Regulatory Developments." Risk
classification of all insured institutions is made by the FDIC for each semi-
annual assessment period.
The FDIC may terminate the deposit insurance of any insured depository
institution if the FDIC determines, after a hearing, that the institution has
engaged or is engaging in unsafe or unsound practices, is in an unsafe or
unsound condition to continue operations or has violated any applicable law,
regulation, order, or any condition imposed in writing by, or written
agreement with, the FDIC. The FDIC may also suspend deposit insurance
temporarily during the hearing process for a permanent termination of
insurance if the institution has no tangible capital. Management of the
Registrant is not aware of any activity or condition that could result in
termination of the deposit insurance of either First Mid Bank or Heartland.
Capital Requirements
Under the ISBA and the regulations of the Commissioner, an Illinois
savings bank must maintain a minimum level of total capital equal to the
higher of 3% of total assets or the amount required to maintain insurance of
deposits by the FDIC. The Commissioner has the authority to require an
Illinois savings bank to maintain a higher level of capital if the
Commissioner deems necessary based on the savings bank's financial condition,
history, management or earnings prospects. The FDIC has established the
following minimum capital standards for state chartered savings banks, such as
Heartland: a leverage requirement consisting of a minimum ratio of Tier 1
capital to total assets of 3% for the most highly-rated savings banks with
minimum requirements of 4% to 5% for all others, and a risk-based capital
requirement consisting of a minimum ratio of total capital to total risk-
weighted assets of 8%, at least one half of which must be Tier 1 capital.
The OCC has established the following minimum capital standards for
national banks, such as First Mid Bank: a leverage requirement consisting of
a minimum ratio of Tier 1 capital to total assets of 3% for the most-highly
rated banks with minimum requirements of 4% to 5% for all others, and a risk-
based capital requirement consisting of a minimum ratio of total capital to
total risk-weighted assets of 8%, at least one-half of which must be Tier 1
capital.
The capital requirements described above are minimum requirements.
Higher capital levels will be required if warranted by the particular
circumstances or risk profiles of individual institutions. For example, the
regulations of both the FDIC and OCC provide that additional capital may be
required to take adequate account of the risks posed by concentrations of
credit, nontraditional activities and the institution's ability to manage such
risks.
On August 2, 1995, the federal banking regulators, including the FDIC and
the OCC, published amendments to their respective risk-based capital standards
designed to take into account interest rate risk ("IRR") exposure. The
amendments provide that a bank's exposure to declines in the economic value of
its capital due to changes in interest rates will be among the factors
considered by the agencies in evaluating a bank's capital adequacy.
Management does not anticipate that this amendment will adversely affect the
ability of either First Mid Bank or Heartland to maintain compliance with
applicable capital requirements.
The IRR amendments do not establish a system for measuring IRR exposure.
However, concurrently with the adoption of the amendments, the agencies issued
a proposed joint policy statement setting out a framework that would be used
to measure the IRR exposure of individual banks. The proposed policy
statement would generally require banks to quantify their level of IRR
exposure using a measurement system developed by the regulators that weights a
bank's assets, liabilities and off-balance sheet positions by risk factors
designed to reflect the approximate change in each instrument's value that
would result from 200 basis point changes in interest rates. The level of IRR
exposure reflected by this measurement process, as well as the level of IRR
exposure reflected by a bank's own internal measurement system, would then be
considered by the agencies in assessing a bank's capital adequacy. Although
it is not presently possible to predict whether, or in what form, the proposed
policy statement will be adopted, management does not anticipate that the
adoption of a policy statement substantially in the form proposed would have a
material adverse effect on the ability of First Mid Bank or Heartland to
maintain compliance with applicable capital requirements.
During the year ended December 31, 1995, neither First Mid Bank nor
Heartland was required by its respective regulators to increase its capital to
an amount in excess of the minimum regulatory requirement. As of December 31,
1995, First Mid Bank and Heartland each exceeded its minimum regulatory
capital requirements.
Federal law provides the federal banking regulators with broad power to
take prompt corrective action to resolve the problems of undercapitalized
institutions. The extent of the regulators' powers depends upon whether the
institution in question is "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized," or "critically under-
capitalized", as defined by regulation. Depending upon the capital category
to which an institution is assigned, the regulators' corrective powers
include: requiring the submission of a capital restoration plan; placing
limits on asset growth and restrictions on activities; requiring the
institution to issue additional capital stock (including additional voting
stock) or to be acquired; restricting transactions with affiliates;
restricting the interest rate the institution may pay on deposits; ordering a
new election of directors of the institution; requiring that senior executive
officers or directors be dismissed; prohibiting the institution from accepting
deposits from correspondent banks; requiring the institution to divest certain
subsidiaries; prohibiting the payment of principal or interest in subordinate
debt; and ultimately, appointing a receiver for the institution.
Additionally, institutions insured by the FDIC may be liable for any loss
incurred by, or reasonably expected to be incurred by, the FDIC in connection
with the default of commonly controlled FDIC insured depository institutions
or any assistance provided by the FDIC to commonly controlled FDIC insured
depository institutions in danger of default.
Dividends
The National Bank Act imposes limitations on the amount of dividends that
a national bank, such as First Mid Bank, may pay without prior regulatory
approval. Generally, the amount is limited to the national bank's current
year's net earnings plus the adjusted retained earnings for the two preceding
years.
Under the ISBA and the regulations of the Commissioner, dividends may be
paid by Heartland out of its net profits (I.E. earnings from current
operations, investments and other assets plus actual recoveries on loans, net
of current expenses including dividends or interest on deposits, additions to
reserves as required by the Commissioner, actual losses, accrued dividends on
preferred stock, if any, and all state and federal taxes). In general, so
long as Heartland's capital ratio exceeds 6% of total assets, Heartland may
declare dividends without prior regulatory approval provided that the
aggregate amount of dividends declared during any 12-month period do not
exceed Heartland's net profits for that period. Any dividend which, when
aggregated with all other dividends declared during the preceding 12-month
period, would exceed Heartland's net profits for that 12-month period would
require prior approval by the Commissioner. If, however, Heartland's capital
falls below 6% of its total assets, Heartland may not declare dividends in any
twelve-month period which, in the aggregate, exceed 50% of its net profits for
that period, without the prior written approval of the Commissioner.
Additionally, Heartland will be unable to pay dividends in an amount
which would reduce its capital below the amount required by the FDIC. The
Commissioner and the FDIC also have the authority to prohibit the payment of
any dividends by the Bank if the Commissioner or the FDIC determine that the
distribution would constitute an unsafe or unsound practice.
The payment of dividends by any financial institution or its holding
company is affected by the requirement to maintain adequate capital pursuant
to applicable capital adequacy guidelines and regulations. As described
above, the Registrant, First Mid Bank and Heartland each exceeded their
minimum capital requirements under applicable guidelines as of December 31,
1995. As of December 31, 1995, approximately $5.7 million was available to be
paid as dividends to the Registrant by First Mid Bank and Heartland.
Insider Transactions
First Mid Bank and Heartland are subject to certain restrictions imposed
by the Federal Reserve Act on any extensions of credit to the Registrant and
its subsidiaries, on investments in the stock or other securities of the
Registrant and its subsidiaries and the acceptance of the stock or other
securities of the Registrant or its subsidiaries as collateral for loans.
Certain limitations and reporting requirements are also placed on extensions
of credit by First Mid Bank and Heartland to their respective directors and
officers, to directors and officers of the Registrant and its subsidiaries, to
principal stockholders of the Registrant, and to "related interests" of such
directors, officers and principal stockholders. In addition, such legislation
and regulations may affect the terms upon which any person becoming a director
or officer of the Registrant or one of its subsidiaries or a principal
stockholder of the Registrant may obtain credit from banks with which First
Mid Bank or Heartland maintain a correspondent relationship.
Safety and Soundness Standards
On July 10, 1995, the federal banking regulators, including the FDIC and
the OCC, published final guidelines establishing operational and managerial
standards to promote the safety and soundness of federally insured depository
institutions. The guidelines, which took effect on August 9, 1995, establish
standards for internal controls, information systems, internal audit systems,
loan documentation, credit underwriting, interest rate exposure, asset growth,
and compensation, fees and benefits. In general, the guidelines prescribe the
goals to be achieved in each area, and each institution will be responsible
for establishing its own procedures to achieve those goals. If an institution
fails to comply with any of the standards set forth in the guidelines, the
institution's primary federal regulator may require the institution to submit
a plan for achieving and maintaining compliance. The preamble to the
guidelines states that the agencies expect to require a compliance plan from
an institution whose failure to meet one or more of the standards is of such
severity that it could threaten the safe and sound operation of the
institution. Failure to submit an acceptable compliance plan, or failure to
adhere to a compliance plan that has been accepted by the appropriate
regulator, would constitute grounds for further enforcement action. The
federal banking agencies have also published for comment proposed asset
quality and earnings standards which, if adopted, would be added to the safety
and soundness guidelines. This proposal, like the final guidelines, would
establish the goals to be achieved with respect to asset quality and earnings,
and each institution would be responsible for establishing its own procedures
to meet such goals.
State Bank Activities
Under federal law and FDIC regulations, FDIC insured state banks, such as
Heartland, are prohibited, subject to certain exceptions, from making or
retaining equity investments of a type, or in an amount, that are not
permissible for a national bank. Federal law and FDIC regulations also
prohibit FDIC insured state banks and their subsidiaries, subject to certain
exceptions, from engaging as principal in any activity that is not permitted
for a national bank or its subsidiary, respectively, unless the bank meets,
and continues to meet, its minimum regulatory capital requirements and the
FDIC determines the activity would not pose a significant risk to the deposit
insurance fund of which the bank is a member.
Branching Authority
Illinois savings banks, such as the Bank, have the authority under
Illinois law to establish branches any where in the State of Illinois, subject
to receipt of all required regulatory approvals. Federal law grants the same
branching authority to national banks, such as First Mid Bank, which are
headquartered in Illinois. Effective June 1, 1997 (or earlier if expressly
authorized by applicable state law), the Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994 (the "Riegle-Neal Act") allows banks to
establish interstate branch networks through acquisitions of other banks,
subject to certain conditions, including certain limitations on the aggregate
amount of deposits that may be held by the surviving bank and all of its
insured depository institution affiliates. The establishment of de novo
interstate branches or the acquisition of individual branches of a bank in
another state (rather than the acquisition of an out-of-state bank in its
entirety) is allowed by the Riegle-Neal Act only if specifically authorized by
state law. The legislation allows individual states to "opt-out" of certain
provisions of the Riegle-Neal Act by enacting appropriate legislation prior to
June 1, 1997. Illinois has enacted legislation permitting interstate bank
mergers beginning on June 1, 1997.
Selected Statistical Information
I. Distribution of Consolidated Assets, Liabilities and Stockholders' Equity
A. Interest Rates and Interest Differential (dollars in thousands)
Year Ended Year Ended
December 31, 1995 December 31, 1994
Avg Bal Int Avg Rate Avg Bal Int Avg Rate
INTEREST EARNING ASSETS
Investment certificates of $ 99 $ 10 10.10% $ 1,211 $ 51 4.21%
deposits
Due from banks-interest 1,511 84 5.56% 924 22 2.38%
bearing
Excess funds sold 6,199 356 5.74% 3,643 156 4.28%
Investment securities:
Taxable 115,725 7,068 6.11% 117,285 5,772 4.92%
Tax-exempt 12,831 733 8.66% 14,546 851 8.86%
Loans (net of unearned 294,220 25,214 8.57% 243,166 19,576 8.05%
income)
Total earning assets 430,585 33,465 7.86% 380,775 26,428 7.06%
NONEARNING ASSETS
Cash and due from banks 15,382 13,720
Premises and equipment 9,333 8,393
Other nonearning assets 12,699 9,150
Allowance for loan losses (2,711) (2,354)
Total assets $465,288 $409,684
INTEREST BEARING LIABILITIES
Demand deposits $106,118 $2,823 2.66% $110,069 $ 2,764 2.51%
Savings deposits 40,920 1,107 2.71% 38,985 1,009 2.59%
Time deposits 202,305 10,958 5.42% 170,252 7,298 4.29%
Other borrowings 24,140 1,266 5.24% 13,103 471 3.59%
Long-term debt 7,636 571 7.48% 5,579 376 6.74%
Total interest-bearing 381,119 16,725 4.39% 337,988 11,918 3.53%
liabilities
NONINTEREST BEARING LIABILITIES
Demand deposits 46,237 37,527
Other liabilities 4,561 3,901
Stockholders' equity 33,371 30,268
Total liabilities & equity $465,288 $409,684
Net interest earnings $16,740 3.47% $14,510 3.53%
Net interest earnings as a
% of interest earning assets
on a full tax equivalent basis 3.98% 3.93%
(1) Full tax equivalent yields on tax exempt securities have been calculated
using a 34% tax rate.
(2) Income on Investment securities on a full tax equivalent basis for the
period ended December 31, 1995 and 1994 amounted to $1,111 and $1,289.
(3) Nonaccrual loans have been included in the average balances.
(4) Interest includes net loan fees.
Selected Statistical Information, Continued
I. Distribution of Consolidated Assets, Liabilities, and Stockholders' Equity
Interest Rates and Interest Differential, Continued (Dollars in thousands)
(above table continued)
Year Ended
December 31, 1993
Avg Bal Int Avg Rate
INTEREST EARNING ASSETS
Investment certificates of deposits $ 3,352 $ 123 3.67%
Due from banks-interest bearing 1,923 57 2.96%
Excess funds sold 6,129 182 2.97%
Investment securities:
Taxable 122,383 6,290 5.14%
Tax-exempt 15,996 888 8.41%
Loans (net of unearned income) 214,408 17,970 8.38%
Total earning assets 364,191 25,510 7.13%
NONEARNING ASSETS
Cash and due from banks 11,256
Premises and equipment 8,432
Other nonearning assets 8,440
Allowance for loan losses (2,067)
Total assets $390,252
INTEREST BEARING LIABILITIES
Demand deposits $107,896 $ 2,893 2.68%
Savings deposits 35,860 1,033 2.88%
Time deposits 168,724 7,410 4.39%
Other borrowings 5,398 337 6.24%
Long-term debt 8,843 262 2.96%
Total interest-bearing liabilities 326,721 11,935 3.65%
NONINTEREST BEARING LIABILITIES
Demand deposits 31,746
Other liabilities 3,798
Stockholders' equity 27,987
Total liabilities & equity $390,252
Net interest earnings $13,575 3.48%
Net interest earnings as a
% of interest earning assets
on a full tax equivalent basis 3.85%
(1) Full tax equivalent yields on tax exempt securities have been calculated
using a 34% tax rate.
(2) Income on Investment securities on a full tax equivalent basis for the
period ended December 31, 1993 amounted to $1,345.
(3) Nonaccrual loans have been included in the average balances.
(4) Interest includes net loan fees.
Selected Statistical Information, Continued
I. Distribution of Consolidated Assets, Liabilities and Stockholders' Equity
B. Interest Rates and Interest Differential, Continued (dollars in
thousands)
1995 Compared to 1994
Increase - (Decrease)
Total Rate/
Change Volume Rate Volume
INTEREST INCOME:
Investment certificates of $(41) $(47) $71 $(65)
deposit
Due from banks-interest bearing 62 14 29 19
Excess funds sold 200 110 53 37
Investment securities:
Taxable 1,296 (78) 1,391 (17)
Tax-exempt (118) (100) (20) 2
Loans 5,638 4,110 1,263 265
Total interest income 7,037 4,009 2,787 241
INTEREST EXPENSE:
Demand deposits 59 (99) 164 (6)
Savings deposits 98 50 46 2
Time deposits 3,660 1,374 1,924 362
Other borrowings 795 398 216 181
Long-term debt 195 139 41 15
Total interest expense 4,807 1,862 2,391 554
NET INTEREST EARNINGS $2,230 $2,147 $ 396 $ (313)
1994 Compared to 1993
Increase - (Decrease)
Total Rate/
Change Volume Rate Volume
INTEREST INCOME:
Investment certificates of $ (72) $(79) $ 18 $(11)
deposit
Due from banks-interest bearing (35) (30) (11) 6
Excess funds sold (26) (73) 86 (39)
Investment securities:
Taxable (519) (262) (267) 10
Tax-exempt (36) (80) 48 (4)
Loans 1,606 2,410 (709) (95)
Total interest income 918 1,886 (835) (133)
INTEREST EXPENSE:
Demand deposits (129) 59 (184) (4)
Savings deposits (24) 90 (105) (9)
Time deposits (112) 67 (177) (2)
Other borrowings 209 126 56 27
Long-term debt 39 11 27 1
Total interest expense (17) 353 (383) 13
NET INTEREST EARNINGS $ 935 $1,533 $(452) $(146)
Nonaccruing loans are not material and have been included in the average loan
balances for purposes of this computation. No out-of-period adjustments have
been included in the above analysis.
The changes in rate/volume are computed on a consistent basis by multiplying
the change in rates with the change in volume. Loan fees included in interest
income are not material. Interest on nontaxable securities is shown on a
tax-equivalent basis using a 34% tax rate.
There were no foreign activities by the Registrant during the three-year
report period ending December 31, 1995.
II. Investment Portfolio
A. The amortized costs, gross unrealized gains and losses and approximate
fair value for available-for-sale and held-to-maturity securities by major
security type at December 31, 1995 and 1994 were as follows (dollars in
thousands):
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
1995 Cost Gains Losses Value
AVAILABLE-FOR-SALE:
U.S. Treasury securities and
obligations of U.S.
government corporations
and agencies $ 72,599 $ 481 $ (683) $ 72,397
Obligations of state and
political subdivisions 8,628 440 (7) 9,061
Mortgage backed securities 35,766 222 (163) 35,825
Other securities 2,105 - - 2,105
Total available-for-sale $119,098 $ 1,143 $ (853) $119,388
HELD-TO-MATURITY:
Obligations of state and
political subdivisions 3,381 43 (15) 3,409
Total held-to-maturity 3,381 43 (15) 3,409
Total $122,479 $ 1,186 $ (868) $122,797
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
1994 Cost Gains Losses Value
AVAILABLE-FOR-SALE:
U.S. Treasury securities and
obligations of U.S.
government corporations
and agencies $ 34,358 $ - $ (970) $ 33,388
Obligations of state and
political subdivisions 9,641 240 (160) 9,721
Mortgage backed securities 24,751 29 (804) 23,976
Other securities 1,888 - - 1,888
Total available-for-sale $ 70,638 $ 269 $(1,934) $ 68,973
HELD-TO-MATURITY:
U.S. Treasury securities and
obligations of U.S.
government corporations
and agencies $ 42,312 $ 6 $(1,760) $ 40,558
Obligations of state and
political subdivisions 4,023 5 (101) 3,927
Mortgage backed securities 15,969 1 (619) 15,351
Total held-to-maturity $ 62,304 $ 12 $(2,480) $ 59,836
Total $132,942 $ 281 $(4,414) $128,809
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
1993 Cost Gains Losses Value
AVAILABLE-FOR-SALE:
U.S. Treasury securities and
obligations of U.S.
government corporations
and agencies $ 25,826 $ 122 $ (31) $ 25,917
Obligations of state and
political subdivisions 14,874 1,239 (42) 16,071
Mortgage backed securities 30,516 267 (78) 30,705
Other securities 1,431 - - 1,431
Total available-for-sale $ 72,647 $ 1,628 $ (151) $ 74,124
HELD-TO-MATURITY:
U.S. Treasury securities and
obligations of U.S.
government corporations
and agencies $ 40,726 $ 125 $ (137) $ 40,714
Obligations of state and
political subdivisions 1,761 21 (7) 1,775
Mortgage backed securities 18,657 135 (38) 18,754
Total held-to-maturity $ 61,144 $ 281 $ (182) $ 61,243
Total $133,791 $ 1,909 $ (333) $135,367
Other securities include stock in the Federal Home Loan Bank totaling
$1,699,000 in 1995, $1,572,000 in 1994 and $1,115,000 in 1993.
B. The following table indicates the expected maturities of investment
securities classified as available-for-sale and held-to-maturity at December
31, 1995 (dollars in thousands) and the weighted average yield for each range
of maturities. Mortgage backed securities are aged according to their
weighted average life. All other securities are shown at their contractual
maturity.
Book Value Maturing for Available-for-Sale Investment Securities
One After 1 After 5 After
year through through ten
or less 5 years 10 years years Total
U.S. Treasury securities and
obligations of U.S.
government corporations
and agencies $17,961 $45,155 $ 9,483 $ - $ 72,599
Obligations of state and
political subdivisions 425 6,934 1,269 - 8,628
Mortgage-backed securities 3,776 27,473 1,239 3,278 35,766
Other securities - - - 2,105 2,105
Total Investments $22,162 $79,562 $11,991 $ 5,383 $119,098
Weighted average yield 5.72% 5.47% 6.06% 8.37%
Full tax equivalent yield 5.73% 5.73% 6.41% 8.37%
Book Value Maturing for Held-to-Maturity Investment Securities
One After 1 After 5 After
year through through ten
or less 5 years 10 years years Total
Obligations of state and
political subdivisions 582 1,884 915 - 3,381
Total held-to-maturity
securities $ 582 $ 1,884 $ 915 $ - $3,381
Weighted average yield 4.70% 4.99% 5.14%
Full tax equivalent yield 7.18% 7.65% 7.79%
The weighted average yields are calculated on the basis of the cost and
effective yields weighted for the scheduled maturity of each security. Full
tax equivalent yields have been calculated using a 34% tax rate.
The maturities of, and yields on, mortgage backed securities have been
calculated using actual repayment history. However, where securities have
call features, and have a market value in excess of par value, the call date
has been used to determine the expected maturity.
With the exception of obligations of the U.S. Treasury and other U.S.
Government agencies and corporations, there were no investment securities of
any single issuer the book value of which exceeded 10% of stockholders' equity
at December 31, 1995.
In December 1995, the Registrant reclassified certain investment
securities between held-to-maturity and available-for-sale in accordance with
guidelines issued by the Financial Accounting Standards Board (FASB)
permitting a one-time change in classification. Based on discussion and
analysis, the Registrant decided that only local, non-rated municipal
securities would be classified as held-to-maturity and the remaining portfolio
would be designated as available-for-sale. The book value and gross
unrealized loss of securities transferred from held-to-maturity to available-
for-sale amounted to $52,536,000 and $445,000, respectively.
III. Loan Portfolio
A. Types of Loans
The following table indicates loans, net of unearned income, by type at
December 31, (dollars in thousands):
1995 1994 1993
Commercial, financial
and agricultural $ 65,916 $ 61,520 $ 50,353
Real estate - mortgage 211,147 195,524 151,916
Installment 27,996 22,294 16,360
Other 1,945 2,815 4,590
Total loans $307,004 $282,153 $223,219
1992 1991
Commercial, financial
and agricultural $ 46,464 $ 43,406
Real estate - mortgage 146,333 69,272
Installment 16,316 15,592
Other 5,080 5,024
Total loans $214,193 $133,294
B. Maturities and Rate Sensitivity of Loans
The following table presents the balance of loans outstanding as of December
31, 1995, by maturities, based on remaining repayments of principal (dollars
in thousands):
Over 1
One year through Over
or less 5 years 5 years Total
Commercial, financial
and agricultural $ 46,581 $ 16,549 $ 2,786 $ 65,916
Real estate - mortgage 45,006 109,254 56,887 211,147
Installment 7,252 20,619 125 27,996
Other 439 1,025 481 1,945
Total loans $ 99,278 $147,447 $ 60,279 $307,004
As of December 31, 1995, loans with maturities over one year consisted of
$163,802,000 in fixed rate loans and $43,924,000 in variable rate loans. The
loan maturities noted above are based on the contractual provisions of the
individual loans. The Registrant has no general policy regarding rollovers
and borrower requests for such are handled on a case by case basis.
C. Risk Elements
1. The following table presents information concerning the aggregate amount
of nonperforming loans. Nonperforming loans include: (a) loans accounted for
on a nonaccrual basis; (b) accruing loans contractually past due 90 days or
more as to interest or principal payments; and (c) loans not included in (a)
and (b) above which are "troubled debt restructuring" as defined in Statement
of Financial Accounting Standards No. 15, "Accounting by Debtors and Creditors
for Troubled Debt Restructuring." (dollars in thousands)
December 31,
1995 1994 1993 1992 1991
Nonaccrual loans $ 636 $ 393 $ 497 $ 685 $ 348
Loans past due ninety days
or more and still accruing 554 509 248 585 418
Restructured loans which are
performing in accordance
with revised terms 604 772 307 383 678
Interest income that would have been reported if nonaccrual and restructured
loans had been performing totaled $143,000, $100,000 and $85,000 for the years
ended December 31, 1995, 1994 and 1993, respectively. Interest income that
was included in income totaled $56,000, $37,000 and $15,000 for the same
periods.
The Registrant's policy is to discontinue the accrual of interest income on
any loan for which principal or interest is 90 days past due or when, in the
opinion of management, there is reasonable doubt as to the timely
collectibility of interest or principal. Nonaccrual loans are returned to
accrual status when, in the opinion of management, the financial position of
the borrower indicates there is no longer any reasonable doubt as to the
timely collectibility of interest or principal.
2. Potential Loan Problems. Management is not aware of any additional
credits which should be disclosed above under "Risk Elements."
3. Foreign Outstandings. There was no foreign activity as of December 31,
1995, required to be disclosed.
4. Loan Concentrations. At December 31, 1995, the Registrant had loan
concentrations in agricultural industries of 12.9% of outstanding loans. The
Registrant had no further industry loan concentrations in excess of 10% of
outstanding loans.
There were no other interest-bearing assets which would be required to be
disclosed as having "risk elements" if such other assets were loans.
Selected Statistical Information, Continued
IV. Summary of Loan Loss Experience
A. Loan loss experience for the years ending December 31, are summarized as
follows (dollars in thousands):
1995 1994 1993 1992 1991
Average loans
outstanding, net
of unearned income $294,220 $243,166 $214,408 $178,919 $127,918
Allowance-
beginning of year 2,608 2,110 1,906 1,566 1,505
Balance of
acquired subsidiary - 343 - 350 -
Charge-offs:
Commercial, financial
and agricultural 18 29 140 298 273
Real estate-mortgage 111 28 241 350 11
Installment 57 120 86 139 132
Total charge-offs 186 177 467 787 416
Recoveries:
Commercial, financial
and agricultural 73 98 150 167 57
Real estate-mortgage - 21 3 18 -
Installment 39 45 26 49 33
Total recoveries 112 164 179 234 90
Net charge-offs 74 13 288 553 326
Provision for loan losses 280 168 492 543 387
Allowance-end of period $ 2,814 $2,608 $ 2,110 $ 1,906 $ 1,566
Ratio of net charge-offs to
average loans .03% .01% .13% .31% .25%
Ratio of allowance
for loan losses to
loans outstanding
(less unearned interest)
at end of period .90% .93% .95% .89% 1.17%
The allowance for loan losses is maintained at a level deemed appropriate by
management to provide for known and inherent risks in the loan portfolio. The
allowance is based on a continuing review of the loan portfolio, the
underlying value of the collateral securing the loans, current economic
conditions and past loan loss experience. Loans which are deemed to be
uncollectible are charged to the allowance. The provision for loan losses and
recoveries are credited to the allowance.
B. The allowance for loan losses, in management's judgment, would be
allocated as follows to cover potential loan losses (in thousands):
December 31, 1995 December 31, 1994
Allowance % of Allowance % of
for loans for loans
loan to total loan to total
losses loans losses loans
Commercial, financial
and agricultural $ 1,554 21.5% $ 1,481 21.8%
Real estate-mortgage 314 68.8% 427 69.3%
Installment 131 9.1% 100 7.9%
Other - .6% - 1.0%
Total allocated 1,999 2,008
Unallocated 815 N/A 600 N/A
Allowance at end of
reported period $ 2,814 100.0% $ 2,608 100.0%
December 31, 1993 December 31, 1992
Allowance % of Allowance % of
for loans for loans
loan to total loan to total
losses loans losses loans
Commercial, financial
and agricultural $ 1,351 22.5% $ 1,045 21.7%
Real estate-mortgage 330 68.1% 325 68.3%
Installment 78 7.3% 183 7.6%
Other - 2.1% - 2.4%
Total allocated 1,759 1,553
Unallocated 351 N/A 353 N/A
Allowance at end of
reported period $ 2,110 100.0% $ 1,906 100.0%
December 31, 1991
Allowance % of
for loans
loan to total
losses loans
Commercial, financial
and agricultural $ 999 32.6%
Real estate-mortgage 248 51.9%
Installment 185 11.7%
Other - 3.8%
Total allocated 1,432
Unallocated 134 N/A
Allowance at end of
reported period $ 1,566 100.0%
The allowance is allocated to the individual loan categories by a specific
reserve for all classified loans plus a percentage of loans not classified
based on historical losses.
V. Average Deposits by Classification
A. The following table sets forth the average deposits and weighted average
rates at December 31, 1995, 1994, and 1993 (dollars in thousands):
1995 1994 1993
Weighted Weighted Weighted
Average Average Average
Amount Rate Amount Rate Amount Rate
Demand deposits:
Non-interest bearing $ 46,237 - $ 37,527 - $ 31,746 -
Interest bearing 106,118 2.66% 110,069 2.51% 107,896 2.68%
Savings 40,920 2.71% 38,985 2.59% 35,860 2.88%
Time deposits 202,305 5.42% 170,252 4.29% 168,724 4.39%
Total average deposits $395,580 3.76% $356,833 3.10% $344,226 3.29%
D. Maturities of Time Deposits of $100,000 or More
The following table sets forth the maturity of time deposits of $100,000 or
more, at December 31, 1995 (dollars in thousands):
Balance
3 months or less $ 17,167
Over 3 through 6 months 6,451
Over 6 through 12 months 7,495
Over 12 months 6,217
Total $ 37,330
There were no time deposits of $100,000 or more that were issued by foreign
offices at December 31, 1995.
VI. Selected Ratios
The following table presents selected financial ratios for the years ended
December 31, 1995, 1994, and 1993:
1995 1994 1993
Return on average total assets .84% .83% .85%
Return on average total stockholders'
equity 11.76% 11.35% 11.80%
Dividend payout ratio 19.76% 20.89% 21.40%
Average total equity to
average assets ratio 7.17% 7.38% 7.17%
VII. Other Borrowings
Information pertaining to other borrowings as of December 31, 1995 is shown in
Note 10 on page 18 of the 1995 Annual Report and is incorporated by reference.
Item 2. Properties
All of the following properties are owned by the Registrant or its Bank
Subsidiaries except those specifically identified as being leased.
First Mid Bank
Mattoon
First Mid Bank's main office is located at 1515 Charleston Avenue,
Mattoon, Illinois. The office building consists of a one-story structure
which was opened in 1965 with approximately 36,000 square feet of office
space, eight walk-in teller stations and a walk-up automated teller machine
("ATM"). Adjacent to this building is a parking lot with parking for
approximately seventy cars. A drive-up facility with ten drive-up lanes is
located across the street from First Mid Bank's main office.
First Mid Bank has a facility at 333 Broadway Avenue East, Mattoon,
Illinois. The one-story office building contains approximately 7,600 square
feet of office space. The main floor provides space for five teller windows,
two private offices, a safe-deposit vault and four drive-up lanes. There is
adequate parking located adjacent to the building. A drive-up ATM is located
adjacent to the building.
First Mid Bank leases a facility at 1504-A Lakeland Boulevard, Mattoon,
Illinois which provides space for 3 tellers, two drive-up lanes and a walk-up
ATM.
First Mid Bank owns an office building located at 1701 Charleston Avenue,
Mattoon, Illinois and an adjacent parking lot. The building is used by MIDS
for its data processing center and backroom operations for the Registrant and
its Bank Subsidiaries.
Sullivan
First Mid Bank operates two locations in Sullivan, Illinois. The main
office is located at 200 South Hamilton Street, Sullivan, Illinois. Its
office building is a one-story structure containing approximately 11,400
square feet of office space with five tellers, six private offices and four
drive-up lanes. Adjacent to its main office is a parking lot used primarily
by the employees. Adequate customer parking is available on two sides of the
main office building. The second office is a leased facility at 435 South
Hamilton, Sullivan, Illinois in the IGA. The facility has two teller
stations, a vault, an ATM and a night depository.
Neoga
First Mid Bank's office in Neoga, Illinois, is located at 102 East 6th
Street, Neoga, Illinois. The building consists of a one-story structure
containing approximately 4,000 square feet of office space. The main office
building provides space for four tellers in the lobby of the building, two
drive-up tellers, four private offices, two night depositories, and an ATM.
Adequate customer parking is available on three sides of the main office
building.
Tuscola
First Mid Bank operates two offices in Tuscola, Illinois. The main
office is located at 100 North Main Street, Tuscola, Illinois. The building
consists of a two-story structure with approximately 18,000 square feet of
office space with space for six tellers, five private offices and a night
depository. Adequate customer parking is available at the main office
building. The second facility is located at 410 South Main Street, Tuscola,
Illinois. The facility has a walk-in teller stations and two drive-up bay
windows and contains approximately 320 square feet of office space. A drive-
up ATM is located adjacent to this facility.
Charleston
First Mid Bank has two offices in Charleston, Illinois. The main office
is located at 701 Sixth Street, Charleston, Illinois. This building is a
one-story facility with an attached two-bay drive-up structure and consists of
approximately 5,500 square feet of office space. This facility has adequate
parking to serve its customers. The office space is comprised of three teller
stations, seven private offices and a night depository. The second office is
located at 580 West Lincoln Avenue, Charleston, Illinois. This office has
three lobby tellers, three drive-up lanes, a commercial night drop and one
private office. A drive-thru ATM is located in the parking lot of this
facility.
Altamont
First Mid Bank has a banking facility located at 101 West Washington
Street, Altamont, Illinois. This building is a one-story structure which has
approximately 4,300 square feet of office space. The office space consists of
nine teller windows, three drive-up teller lanes (one of these faciliates an
ATM), seven private offices, one conference room and a night depository.
Adequate parking is available on three sides of the building.
Effingham
First Mid Bank operates a facility at 902 N Keller Drive, Effingham,
Illinois. The building is a two story structure with approximately 4,000
square feet of office space. This office space consists of four teller
stations, three drive-up teller lanes, five private offices and a night
depository. Adequate parking is available to customers in front of the
facility.
First Mid Bank also owns a building and land at 900 N Keller Drive,
Effingham, Illinois which is currently vacant.
Arcola
First Mid Bank leases a facility at 324 South Chestnut Street, Arcola,
Illinois. This building is a one-story structure with approximately 1,140
square feet of office space. This office space consists of two lobby teller
stations, one loan station, two drive-up teller lanes, one private office and
a night depository. A drive-up ATM lane is available adjacent to the teller
lanes. Adequate parking is available to customers in front of the facility.
Heartland
Mattoon
The main office is located at 1520 Charleston Avenue, Mattoon, Illinois.
The office building consists of a two-story structure which has approximately
20,000 square feet of office space including six teller stations on the main
floor. A drive-up facility with eight drive-up lanes is located adjacent to
the main office. Adequate customer parking is available on two sides of the
building and in an adjacent parking lot.
Urbana
Heartland's Urbana facility is located at 601 South Vine Street, Urbana,
Illinois. Its office building consists of a one-story structure and contains
approximately 3,600 square feet. The office building provides space for three
tellers, one private office and two drive-up lanes. An adequate customer
parking lot is located on the south side of the building.
Heartland sold two single family residences located at 206 East Oregon
Street, Urbana, Illinois and 205 East California Avenue, Urbana, Illinois,
during 1995. These properties are adjacent to the Urbana facility and were
previously held for expansion purposes.
Registrant
The Registrant owns a single family residence at 1515 Wabash Avenue,
Mattoon, Illinois which is being held for future expansion.
Item 3. Legal Proceedings.
Since the Bank Subsidiaries act as depositories of funds, each is named from
time to time as a defendent in law suits (such as garnishment proceedings)
involving claims to the ownership of funds in particulare accounts.
Management believes that all such litigation as well as other pending legal
preceedings constitute ordinary routine litigation incidential to the business
of the Bank Subsidiaries and that such litigation will not materially
adversely affect the Registrant's consolidated financial condition.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
The following portions of the 1995 Annual Report are being incorporated by
reference: "Common Stock Information and Dividends" on page 29, and
restrictions on the Registrant's ability to pay dividends in Note 15 of Notes
to Consolidated Financial Statements on page 20.
Item 6. Selected Financial Data
The "Five-Year Financial Data" on page 1 of the 1995 Annual Report is
incorporated by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The "Management's Discussion and Analysis of Financial Condition and Results
of Operations" on pages 25 through 29 of the 1995 Annual Report are
incorporated by reference.
Item 8. Financial Statements and Supplementary Data
The consolidated financial statements and related notes on pages 10 through 20
in the 1995 Annual Report are incorporated by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
"Election of Directors" on pages 2 through 3 of the 1996 Proxy Statement is
incorporated by reference.
Section 16(a) of the Securities Exchange Act of 1934 requires that the
Registrant's executive officers and directors and persons who own more than
10% of the Registrant's Common Stock file reports of ownership and changes in
ownership with the Securities and Exchange Commission and with the exchange on
which the Registrant's shares of Common Stock are traded. Such persons are
also required to furnish the Registrant with copies of all Section 16(a) forms
they file. Based solely on the Registrant's review of the copies of such
forms, the Registrant is not aware that any of its directors and executive
officers or 10% stockholders failed to comply with the filing requirements of
Section 16(a) during the period commencing January 1, 1995 and ending December
31, 1995.
Executive Officers of the Registrant
The executive officers of the Registrant are identified below. The executive
officers of the Registrant are elected annually by the Registrant's Board of
Directors.
Name (Age) Position With Registrant
Daniel E. Marvin, Jr. (57) Chairman of the Board of Directors,
President and Chief Executive Officer
William S. Rowland (49) Director, Chief Financial Officer,
Secretary and Treasurer
Dan R. Cunningham (46) Vice President, Trust and Farm
Stanley E. Gilliland (51) Vice President, Lending
Alfred M. Wooleyhan, Jr. (48) Vice President, Development
Daniel E. Marvin, Jr., age 57, has been Chairman of the Board of Directors,
President and Chief Executive Officer of the Registrant and the First Mid Bank
since 1983, and has been Vice Chairman of the Board of Directors of Heartland
since 1992. He was appointed president of Heartland in 1994.
William S. Rowland, age 49, has served as a director of the Registrant since
1991, has been Chief Financial Officer since 1989 and has served as
Secretary/Treasurer since 1991. Mr. Rowland is also Executive Vice President,
Finance of First Mid Bank since 1989. Since 1989 he has also been a director
of MIDS, and became a director of Heartland in 1992. Mr. Rowland was in the
Davenport, Iowa, office of KPMG Peat Marwick from 1975-1989.
Daniel R. Cunningham, age 46, has been Vice President of the Trust and Farm
Department of the Registrant since 1987. Mr. Cunningham has also served since
1987 as a director, Secretary and Executive Vice President of First Mid Bank.
Stanley E. Gilliland, age 51, has been Vice President of Lending of the
Registrant since 1985, and has been Executive Vice President of Lending for
First Mid Bank since 1990. Mr. Gilliland is also a director and member of the
Loan Committee of Heartland.
Alfred M. Wooleyhan, Jr., age 48, has been Vice President of Development of
the Registrant since the beginning of 1995. Mr. Wooleyhan was the President
of the Charleston Business Unit of First Mid Bank from 1989-1995.
Item 11. Executive Compensation.
"Remuneration of Executive Officers," "Retirement Benefits" and "Transactions
with Management" on pages 4 through 6 of the 1996 Proxy Statement is
incorporated by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
"Security Ownership of Certain Beneficial Owners" and "Security Ownership of
Management" on pages 8 through 9 of the 1996 Proxy Statement is incorporated
by reference.
Item 13. Certain Relationships and Related Transactions.
"Transactions with Management" on page 4 of the 1996 Proxy Statement and Note
5 of Notes to the Consolidated Financial Statements on pages 16 through 17 of
the 1995 Annual Report are incorporated by reference.
PART IV
Item 14. Exhibits, Financial Statements Schedules, and Reports on Form 8-K.
1995 Annual
Form 10-K Report
Page Number Page Number
(a)(1) Index to Financial Statements
Incorporated by reference is Part II,
Item 8 of this report:
First Mid-Illinois Bancshares, Inc.
and Subsidiaries:
Consolidated Balance Sheets as of
December 31, 1995 and 1994 49 10
Consolidated Statements of Income for the years
ended December 31, 1995, 1994 and 1993 50 11
Consolidated Statements of Changes in
Stockholders' Equity for the years ended
December 31, 1995, 1994 and 1993 51 12
Consolidated Statements of Cash Flows for the
years ended December 31, 1995, 1994 and 1993 52 13
Notes to Consolidated Financial Statements 53 - 61 14 - 22
Independent Auditors' Report 63 24
(a)(2) Financial Statement and Schedules
All schedules are omitted as they are not applicable or required or else
equivalent information has been included in the financial statements or
notes thereto.
(a)(3) Exhibits
The exhibits required by Item 601 of Regulation S-K are included along
with this Form 10-K and are listed on the "Index to Exhibits" immediately
following the signature page.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST MID-ILLINOIS BANCSHARES, INC. (Registrant)
/s/ Daniel E. Marvin, Jr.
*-------------------------------------*
Daniel E. Marvin, Jr.
President and Chief Executive Officer
/s/ William S. Rowland
*-------------------------------------*
William S. Rowland
Dated: March 26, 1996 Chief Financial Officer
*---------------------*
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signatures Title Dated
/s/ Daniel E. Marvin, Jr. 03/26/96
Daniel E. Marvin, Jr. Principal Executive Officer and Director
/s/ William S. Rowland 03/26/96
William S. Rowland Principal Financial Officer and Director
/s/ Charles A. Adams 03/26/96
Charles A. Adams Director
Kenneth R. Diepholz Director
/s/ Richard A. Lumpkin 03/26/96
Richard A. Lumpkin Director
Gary W. Melvin Director
William G. Roley Director
/s/ Ray A. Sparks 03/26/96
Ray A. Sparks Director
Exhibit Index to Form 10-K Registration Statement
Incorporated
Exhibit Description Herein by Filed Page
No. Reference To Herewith No.
3.1 Restated Certificate of Exhibit 3(a) to
Incorporation and First Mid-Illinois Bancshares,
Amendment to Restated Certificate Inc.'s Annual Report on Form 10-K
of Incorporation of First Mid- for the year ended December 31, 1987
Illinois Bancshares, Inc. (File No 0-13688)
4.2 Restated Bylaws of First Mid- Exhibit 3(b) to First Mid-Illinois
Illinois Bancshares, Inc. Bancshares, Inc.'s Annual Report on
Form 10-K for the year ended December
31, 1987 (File No 0-13368)
11.1 Statement re: Computation of Note 1 in the
Earnings Per Share Annual Report to
Stockholders (see
Exhibit 13.1)
13.1 Annual Report to Security Holders 1-37 38-72
(furnished for the information for
the Commission and not to be deemed
"filed" as part of the Form 10-K
except for portions incorporated by
reference)
21.1 Subsidiaries of the Registrant 35
22.1 Form S-8 Registration Statement for Form S-8 filed
the Registrant's Deferred November 8, 1995
Compensation Plan (File No. 033-64061)
Form S-8 Registration Statement for Form S-8 filed
the Registrant's First Retirement November 13, 1995
and Savings Plan (File No. 033-64139)
Form S-3 Registration Statement for Form S-3 filed
the Registrant's Dividend September 23, 1994
Reinvestment Plan (File No. 033-84404)
23.1 Consent of KPMG Peat Marwick LLP 36
99.1 Proxy Statement for the 1996 Annual 73-89
Meeting of Stockholders
First Mid-Illinois Bancshares, Inc.
Exhibit #21.1
S.E.C. Form 10-K
December 31, 1995
Subsidiaries of Registrant:
First Mid-Illinois Bank & Trust, N.A., Mattoon, IL
Heartland Savings Bank, Mattoon, IL
Mid-Illinois Data Services, Inc., Mattoon, IL
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
First Mid-Illinois Bancshares, Inc.:
RE: REGISTRATION STATEMENTS
* Registration No. 33-84404 on Form S-3
* Registration No. 33-64061 on Form S-8
* Registration No. 33-64139 on Form S-8
We consent to incorporation by reference in the subject Registration
Statements on Form S-3 and S-8 of First Mid-Illinois Bancshares, Inc. of our
report dated January 26, 1996, relating to the consolidated balance sheets of
First Mid-Illinois Bancshares, Inc. and subsidiaries as of December 31, 1995
and 1994, and the related consolidated statements of income, changes in
stockholders' equity, and cash flows for each of the years in the three year
period ended December 31, 1995, which report is incorporated by reference in
the December 31, 1995 annual report on Form 10-K of First Mid-Illinois
Bancshares, Inc.
KPMG Peat Marwick LLP
Chicago, Illinois
March 15, 1996
EX-13 Exhibit 13
First Mid-Illinois Bancshares, Inc.
Financial Report and Management's Discussion and Analysis from the
Registrant's 1995 Annual Report to Shareholders.
Financial Highlights
For the Year (in thousands)
1995 1994
Net Income $ 3,924 $ 3,434
Dividends Declared on Common Stock 722 658
Per Common Share
Primary Earnings Per Share $ 4.10 $ 3.59
Fully Diluted Earnings Per Share 3.88 3.43
Dividends Declared .81 .75
Book Value-End of Period 36.07 31.37
Averages (in thousands)
Total Assets $465,287 $409,684
Total Earnings Assets 430,585 380,775
Investment Securities 128,556 131,831
Loans 294,220 243,166
Deposits 395,580 356,833
Stockholders' Equity 33,371 30,268
Common Stockholders' Equity 30,271 27,168
At Year-End (in thousands)
Total Assets 472,494 451,158
Investment Securities 122,769 131,277
Loans 307,004 282,153
Deposits 396,879 389,568
Common Stockholders' Equity 32,209 27,500
Ratios
Return on Average Assets .84% .84%
Return on Average Common Equity 12.02 11.59
Tier 1 Capital to Risk-Based Assets 10.50 9.68
Total Capital to Risk-Based Assets 11.51 10.69
Leverage 6.24 5.63
Five-Year Financial Data
(Dollars in thousands, except per share data)
Income, Dividends and Capital:
1995 1994 1993 1992 1991
Interest income $ 33,465 $ 26,428 $ 25,510 $ 24,589 $ 22,125
Interest expense 16,725 11,918 11,935 12,839 12,877
Net interest income 16,740 14,510 13,575 11,750 9,248
Provision for loan losses 280 168 492 543 387
Net interest income after
provision for loan losses 16,460 14,342 13,083 11,207 8,861
Other income 4,009 3,805 3,928 3,580 2,866
Other expenses 14,715 13,263 12,713 10,823 9,152
Income before income taxes
and cumulative effect of
change in accounting
principle 5,754 4,884 4,298 3,964 2,575
Income taxes 1,830 1,450 1,150 1,100 563
Net income before cumulative
effect of change in
accounting principle 3,924 3,434 3,148 2,864 2,012
Cumulative effect of change in
accounting principle - - 155 - -
Net income $ 3,924 $ 3,434 $ 3,303 $ 2,864 $ 2,012
Dividends to common $ 722 $ 658 $ 658 $ 658 $ 526
stockholders
Dividends to preferred 286 286 286 143 -
stockholders
Stockholders' equity 35,309 30,600 30,184 26,850 21,687
Per Common Share Statistics:
Weighted average number of
common shares outstanding 887,370 876,769 876,769 876,769 876,769
Primary earnings per common
share before cumulative
effect of change in
accounting principle $ 4.10 $ 3.59 $ 3.26 $ 3.10 $ 2.29
Primary earnings per common 4.10 3.59 3.44 3.10 2.29
share
Fully diluted earnings per
common share before
cumulative effect of change
in accounting principle 3.88 3.43 3.14 3.05 2.29
Fully diluted earnings per 3.88 3.43 3.30 3.05 2.29
common share
Dividends per common share .81 .75 .75 .75 .60
Book value per common share 36.07 31.37 30.89 27.09 24.74
Selected Balance Sheet Data:
Assets
Cash and cash equivalents $ 23,295 $ 17,713 $ 21,417 $ 15,983 $ 11,304
Interest bearing deposits 99 99 2,875 3,860 3,959
Investment securities 122,769 131,277 135,268 145,476 109,088
Net loans 304,190 279,545 221,109 212,287 131,728
Other assets 22,141 22,524 16,940 17,521 10,474
Total assets $472,494 $451,158 $397,609 $395,127 $266,553
Liabilities and Stockholders'
Equity
Deposits $396,879 $389,568 $349,058 $349,605 $229,009
Other borrowings 28,515 19,590 9,630 10,560 10,080
Long-term debt 7,200 7,700 5,000 5,500 3,400
Other liabilities 4,591 3,700 3,737 2,612 2,377
Total liabilities 437,185 420,558 367,425 368,277 244,866
Stockholders' equity 35,309 30,600 30,184 26,850 21,687
Total liabilities and
stockholders' equity $472,494 $451,158 $397,609 $395,127 $266,553
Consolidated Balance Sheets
December 31, 1995 and 1994
(In thousands, except share data) 1995 1994
Assets
Cash and due from banks (note 3):
Noninterest bearing $ 17,536 $ 17,631
Interest bearing 784 82
Excess funds sold 4,975 -
Cash and cash equivalents 23,295 17,713
Interest bearing deposits with
financial institutions 99 99
Investment securities available-for-sale,
at fair value (note 4) 119,388 68,973
Investment securities held-to-maturity, at
amortized cost (estimated fair value of
$ 3,409 and $59,836 at December 31, 1995
and 1994) (note 4) 3,381 62,304
Loans (note 5) 307,004 282,153
Less allowance for loan losses (note 6) 2,814 2,608
Net loans 304,190 279,545
Premises and equipment, net (note 7) 9,487 9,336
Accrued interest receivable 4,397 3,929
Intangible assets (notes 2 and 8) 6,019 6,627
Other assets (note 14) 2,238 2,632
Total assets $472,494 $451,158
Liabilities and Stockholders' Equity
Deposits:
Noninterest bearing $ 51,017 $ 45,159
Interest bearing (note 9) 345,862 344,409
Total deposits 396,879 389,568
Accrued interest payable 1,580 1,014
Other borrowings (notes 4 and 10) 28,515 19,590
Long-term debt (note 11) 7,200 7,700
Other liabilities (note 14) 3,011 2,686
Total liabilities 437,185 420,558
Stockholders' Equity
Series A convertible preferred stock; no par
value; authorized 1,000,000 shares; issued 620
shares with stated value of $5,000 per share 3,100 3,100
Common stock, $4 par value; authorized 2,000,000
shares; issued 894,991 shares in 1995 and
876,769 shares in 1994 3,580 3,515
Additional paid-in-capital 3,969 3,531
Retained earnings 24,493 21,577
Net unrealized gain(loss) on available-for-
sale investment securities, net of tax (note 4) 191 (1,099)
35,333 30,624
Less treasury stock at cost, 2,000 shares 24 24
Total stockholders' equity 35,309 30,600
Total liabilities and stockholders' equity $472,494 $451,158
See accompanying notes to consolidated financial statements.
Consolidated Statement of Income
For the years ended December 31, 1995, 1994 and 1993
(In thousands, except per share data) 1995 1994 1993
Interest income:
Interest and fees on loans (note 5) $25,214 $19,576 $17,970
Interest on investment securities:
Taxable 7,068 5,772 6,290
Exempt from federal income tax 733 851 888
Interest on excess funds sold 356 178 239
Interest on deposits with financial institutions 94 51 123
Total interest income 33,465 26,428 25,510
Interest expense:
Interest on deposits (note 9) 14,888 11,071 11,336
Interest on other borrowings (note 10) 1,266 471 262
Interest on long-term debt (note 11) 571 376 337
Total interest expense 16,725 11,918 11,935
Net interest income 16,740 14,510 13,575
Provision for loan losses (note 6) 280 168 492
Net interest income after provision for loan 16,460 14,342 13,083
losses
Other income:
Trust revenues 1,118 1,118 1,119
Brokerage revenues 183 349 92
Service charges 1,574 1,456 1,345
Securities gains(losses), net (note 4) - (4) 19
Mortgage banking income 273 158 517
Other 861 728 836
Total other income 4,009 3,805 3,928
Other expense:
Salaries and employee benefits (note 13) 7,484 6,964 6,517
Net occupancy expense 1,021 937 900
Equipment rentals, depreciation and maintenance 1,277 1,032 1,017
Federal deposit insurance premiums 590 802 729
Amortization of intangible assets (note 8) 608 358 348
Other 3,735 3,170 3,202
Total other expense 14,715 13,263 12,713
Income before income taxes and cumulative
effect of change in accounting principle 5,754 4,884 4,298
Income taxes (note 14) 1,830 1,450 1,150
Net income before cumulative effect of
change in accounting principle 3,924 3,434 3,148
Cumulative effect of change in accounting
for income taxes (note 14) - - 155
Net income $ 3,924 $ 3,434 $ 3,303
Per common share data:
Primary earnings per share before cumulative
effect of change in accounting principle $ 4.10 $ 3.59 $ 3.26
Primary earnings per share 4.10 3.59 3.44
Fully diluted earnings per share before
cumulative
effect of change in accounting principle 3.88 3.43 3.14
Fully diluted earnings per share 3.88 3.43 3.30
See accompanying notes to consolidated financial statements
Consolidated Statements of Changes in Stockholders' Equity
(In thousands, except for per share data)
Net Unrealized
Gain(Loss)
on Available-
Additional for-sale
Preferred Common Paid-In- Retained Investment Treasury
Stock Stock Capital Earnings Securities Stock Total
December 31, 1992 $ 3,100 $3,515 $3,531 $16,728 $ - $ (24) $26,850
Net income - - - 3,303 - - 3,303
Cash dividends on
preferred stock
($462.50 per
share) - - - (286) - - (286)
Cash dividends on
common stock
($.75 per share) - - - (658) - - (658)
Implementation of
change in
accounting for
marketable debt
and equity
securities, net
of tax - - - - 975 - 975
December 31, 1993 3,100 3,515 3,531 19,087 975 (24) 30,184
Net income - - - 3,434 - - 3,434
Cash dividends on
preferred stock
($462.50 per
share) - - - (286) - - (286)
Cash dividends on
common stock
($.75 per share) - - - (658) - - (658)
Change in net
unrealized
(loss) on
available-for-
sale investment
securities, net
of tax - - - - (2,074) - (2,074)
December 31, 1994 3,100 3,515 3,531 21,577 (1,099) (24) 30,600
Net income - - - 3,924 - - 3,924
Cash dividends on
preferred stock
($462.50 per
share) - - - (286) - - (286)
Cash dividends on
common stock
($.81 per share) - - - (722) - - (722)
Issuance of 16,222
common shares
pursuant to the
Dividend Re-
investment Plan - 65 438 - - - 503
Change in net
unrealized gain
on available-
for-sale
investment
securities, net
of tax - - - - 1,290 - 1,290
December 31, 1995 $ 3,100 $3,580 $ 3,969 $24,493 $ 191 $ (24) $35,309
See accompanying note to consolidated financial statements.
Consolidated Statements of Cash Flows
(In thousands) 1995 1994 1993
Cash flows from operating activities:
Net income $ 3,924 $ 3,434 $ 3,303
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for loan losses 280 168 492
Depreciation, amortization and accretion, 1,231 1,503 2,440
net
Loss (gain) on sales of securities, net - 4 (19)
Gain on sale of loans held for sale, net (126) (22) (418)
Deferred income taxes (110) 158 (325)
(Increase) decrease in accrued interest (468) 158 1,055
receivable
Increase (decrease) in accrued interest 566 170 (223)
payable
Origination of mortgage loans held for sale (10,592) (4,307) (19,226)
Proceeds from sale of mortgage loans held 11,055 5,021 19,732
for sale
(Increase) decrease in other assets 394 365 (1,256)
Increase (decrease) in other liabilities (290) (946) 1,213
Net cash provided by operating activities 5,864 5,706 6,768
Cash flows from investing activities:
Purchases of premises and equipment (891) (455) (338)
Net increase in loans (25,262) (29,438) (9,402)
Proceeds from sales of:
Investment securities - - 6,018
Securities available-for-sale 487 21,232 -
Proceeds from maturities of:
Investment securities - - 79,633
Securities available-for-sale 19,905 4,274 -
Securities held-to-maturity 12,549 31,631 -
Purchases of:
Investment securities - - (75,266)
Securities available-for-sale (16,200) (22,636) -
Securities held-to-maturity (6,161) (14,975) -
Net decrease in interest bearing deposits - 2,776 985
Purchase of financial organization, net of - (6,706) -
cash received
Net cash provided by (used in) investing (15,573) (14,297) 1,630
activities
Cash flows from financing activities:
Net increase (decrease) in deposits 7,311 (6,829) (547)
Increase (decrease) in other borrowings 8,925 9,960 (930)
Repayment of long-term debt (500) (300) (500)
Proceeds from long-term debt - 3,000 -
Dividends paid on preferred stock (58) (286) (286)
Dividend paid on common stock (387) (658) (701)
Net cash provided by (used in) financing 15,291 4,887 (2,964)
activities
Increase (decrease) in cash and cash 5,582 (3,704) 5,434
equivalents
Cash and cash equivalents at beginning of 17,713 21,417 15,983
year
Cash and cash equivalents at end of year $23,295 $17,713 $21,417
Additional disclosures of cash flow
information
Cash paid during the year for:
Interest paid $17,291 $12,306 $12,158
Income taxes 1,900 1,400 1,410
Loans transfered to real estate owned 182 264 610
See accompanying notes to consolidated financial statements
Notes To Consolidated Financial Statements
December 31, 1995, 1994 and 1993
Note 1 - Summary of Significant Accounting Policies
Basis of Accounting and Consolidation
The accompanying consolidated financial statements include the accounts of
First Mid-Illinois Bancshares, Inc. (Company) and its wholly owned
subsidiaries: First Mid-Illinois Bank & Trust, N.A. (Bank); Heartland Savings
Bank (Heartland); and Mid-Illinois Data Services, Inc. (MIDS). All
significant intercompany balances and transactions have been eliminated.
Certain amounts in the 1994 and 1993 consolidated financial statements have
been reclassified to conform with the 1995 presentation. The accounting and
reporting policies of the Company conform to generally accepted accounting
principles and to general practices within the banking industry. The
following is a description of the more significant of these policies.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the consolidated financial statements and
accompanying notes. Actual results could differ from these estimates.
Cash Equivalents
For purposes of reporting cash flows, cash equivalents include amounts due
from banks and excess funds sold. Generally, excess funds are sold for one-day
periods.
Investment Securities
At December 31, 1993, the Company adopted the Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" (FAS 115). The Company classifies its debt securities into
one or more of three categories: held-to-maturity, available-for-sale, or
trading. Held-to-maturity securities are those which management has the
positive intent and ability to hold to maturity. Available-for-sale
securities are those securities which management may sell prior to maturity as
a result of changes in interest rates, prepayment factors, or as part of the
Company's overall asset and liability strategy. Trading securities are those
securities bought and held principally for the purpose of selling them in the
near term. The Company has no securities designated as trading.
Held-to-maturity securities are recorded at cost adjusted for amortization
of premium and accretion of discount to the earlier of the call date or
maturity date using the interest method.
Available-for-sale securities are recorded at fair value. Unrealized
holding gains and losses, net of the related income tax effect, are excluded
from income and reported as a separate component of stockholders' equity. If
a decrease in the market value of a security is expected to be other than
temporary, then the security is written down to its fair value through a
charge to income.
Realized gains and losses on the sale of investment securities are recorded
by using the specific identification method.
Loans
Loans are stated at the principal amount outstanding, net of the allowance
for loan losses. Interest on substantially all loans is credited to income
based on the principal amount outstanding.
The Company's policy is to discontinue the accrual of interest income on any
loan for which principal or interest is 90 days past due or when, in the
opinion of management, there is reasonable doubt as to the timely
collectibility of interest or principal. Nonaccrual loans are returned to
accrual status when, in the opinion of management, the financial position of
the borrower indicates there is no longer any reasonable doubt as to the
timely collectibility of interest or principal.
Allowance for Loan Losses
The allowance for loan losses is maintained at a level deemed appropriate by
management to provide for known and inherent risks in the loan portfolio. The
allowance is based on a continuing review of the loan portfolio, the
underlying value of the collateral securing the loans, current economic
conditions and past loan loss experience. Loans which are deemed to be
uncollectible are charged to the allowance. The provision for loan losses and
recoveries are credited to the allowance.
The Company adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 114, "Accounting by Creditors for Impairment of a Loan",
as amended by SFAS No. 118, "Accounting by Creditors for Impairment of a Loan
- Income Recognition and Disclosure", on January 1, 1995. Management,
considering current information and events regarding the borrower's ability to
repay their obligations, considers a loan to be impaired when it is probable
that the Company will be unable to collect all amounts due according to the
contractual terms of the note agreement, including principal and interest.
The amount of the impairment is measured based on the fair value of the
collateral, if the loan is collateral dependent, or alternatively, at the
present value of expected future cash flows discounted at the loan's effective
interest rate. Interest income on impaired loans is recorded when cash is
received and only if principal is considered to be fully collectible.
Premises and Equipment
Premises and equipment are carried at cost less accumulated depreciation and
amortization. Depreciation and amortization is determined principally by the
straight-line method over the estimated useful lives of the assets.
Intangible Assets
Intangible assets generally arise from business combinations which the
Company accounted for as purchases. Such assets consist of the excess of the
purchase price over the fair market value of net assets acquired, specific
amounts assigned to core deposit relationships of acquired businesses and
purchased mortgage servicing rights. Intangible assets are amortized by the
straight-line and accelerated methods over various periods of up to 15 years.
The Company assesses the recoverability of its intangible assets through
reviews of various economic factors on a periodic basis in determining whether
impairment, if any, exists.
Preferred Stock
In connection with the Company's acquisition of Heartland in 1992, $3.1
million of Series A perpetual, cumulative, non-voting, convertible, preferred
stock was issued to directors and certain senior officers of the Company
pursuant to a private placement. 620 shares of the preferred stock were sold
at a stated value of $5,000 per share with such shares bearing a dividend rate
of 9.25%. The preferred stock may be converted at any time, at the option of
the preferred stockholder, into common shares at the conversion ratio of 202.1
shares of common stock for each share of preferred. The Company also has the
right, any time after July 1, 1998, and upon giving at least thirty days prior
notice, to redeem all (but not less than all) of the preferred stock at a cash
value of $5,000 per share plus any accrued but unpaid dividends. The Company
also has the right at any time after July 1, 1998, and upon giving at least
thirty days prior notice, to require the conversion of all (but not less than
all) of the preferred stock into common stock at the conversion ratio.
Mortgage Banking Activities
Heartland originates residential mortgage loans both for its portfolio and
for sale into the secondary market, generally with servicing rights retained.
Included in mortgage banking income are gains or losses on the sale of loans
and servicing fee income. Origination costs for loans sold are expensed as
incurred. Loans that are originated and held for sale are carried at the
lower of aggregate amortized cost or estimated market value.
Income Taxes
The Company and its subsidiaries file a consolidated Federal income tax
return with each organization computing its taxes on a separate company basis.
Amounts provided for income tax expense are based on income reported for
financial statement purposes rather than amounts currently payable under tax
laws.
Effective January 1, 1993 the Company adopted the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (FAS
109) and, accordingly, has reported the cumulative effect of that accounting
change in the 1993 consolidated statement of income. Deferred tax assets and
liabilities are recognized for future tax consequences attributable to the
temporary differences existing between the financial statement carrying
amounts of assets and liabilities and their respective tax bases, as well as
operating loss and tax credit carryforwards. To the extent that current
available evidence about the future raises doubt about the realization of a
deferred tax asset, a valuation allowance is established. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected
to be recovered or settled. The effect on deferred tax assets and liabilities
of a change in tax rates is recognized as an increase or decrease in income
tax expense in the period such change is enacted.
Trust Department Assets
Property held for customers in fiduciary or agency capacities is not
included in the accompanying consolidated balance sheets since such items are
not assets of the Company or its subsidiaries.
Earnings Per Share
Income for primary and fully diluted earnings per common share is adjusted
for dividends attributable to preferred stock. Primary earnings per common
share is based on the weighted average number of common shares outstanding.
Fully diluted earnings per share data is computed by using the weighted
average number of common shares outstanding, increased by the assumed
conversion of the convertible preferred stock.
The weighted average number of common equivalent shares used in calculating
earnings per share were as follows:
1995 1994 1993
Primary 887,370 876,769 876,769
Fully diluted 1,012,672 1,002,071 1,002,071
Note 2 - Acquisitions
On October 4, 1994, the Bank acquired all of the outstanding stock of
Downstate Bancshares, Inc. (DBI) which owned 100% of the stock of Downstate
National Bank (DNB). DNB had locations in Altamont and Effingham, Illinois.
Immediately following the acquisition, DBI was dissolved and DNB was merged
with and into the Bank with the Bank being the surviving entity.
DBI was purchased for cash of $8,570,0000, with $5,570,000 of that amount
being internally generated funds and $3,000,000 resulting from additional
long-term borrowings of the Company.
The acquisition of DBI by the Bank was accounted for using the purchase
method of accounting whereby the assets and liabilities of DBI were recorded
at their fair values as of the acquisition date and the operating results of
DBI operations have been combined with those of the Company since October 4,
1994. A summary of the fair values of those assets and liabilities at October
4, 1994, follows (in thousands):
Fair values of assets acquired: 10/04/94
Cash and cash equivalents $ 1,864
Investment securities 18,019
Loans, net of allowance 29,859
Premises and equipment 1,368
Other assets 892
Total 52,002
Fair values of liabilities assumed:
Deposits 47,338
Other liabilities 583
Total 47,921
Fair value of net assets acquired 4,081
Purchase price of DBI stock 8,570
Goodwill (excess of purchase price over
fair value of net assets acquired $ 4,489
Note 3 - Cash and Due from Banks
Aggregate cash and due from bank balances of $5,881,000 and $5,280,000 at
December 31, 1995 and 1994, respectively, were maintained in satisfaction of
statutory reserve requirements of the Federal Reserve Bank.
Note 4 - Investment Securities
The amortized cost, gross unrealized gains and losses and estimated fair
values for available-for-sale and held-to-maturity securities by major
security type at December 31, 1995 and 1994 were as follows (in thousands):
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
1995 Cost Gains Losses Value
Available-for-sale:
U.S. Treasury securities
and obligations of U.S.
Government corporations
and agencies $ 72,599 $ 481 $ (683) $ 72,397
Obligations of states and
political subdivisions 8,628 440 (7) 9,061
Mortgage-backed securities 35,766 222 (163) 35,825
Other securities 2,105 - - 2,105
Total available-for-sale $119,098 $1,143 $ (853) $119,388
Held-to-maturity:
Obligations of states and
political subdivisions $ 3,381 $ 43 $ (15) $ 3,409
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
1994 Cost Gains Losses Value
Available-for-sale:
U.S. Treasury securities
and obligations of U.S.
Government corporations
and agencies $ 34,358 $ - $ (970) $ 33,388
Obligations of states and
political subdivisions 9,641 240 (160) 9,721
Mortgage-backed securities 24,751 29 (804) 23,976
Other securities 1,888 - - 1,888
Total available-for-sale $ 70,638 $ 269 $(1,934) $ 68,973
Held-to-maturity:
U.S. Treasury securities
and obligations of U.S.
Government corporations
and agencies $ 42,312 $ 6 $(1,760) $ 40,558
Obligations of states and
political subdivisions 4,023 5 (101) 3,927
Mortgage-backed securities 15,969 1 (619) 15,351
Total held-to-maturity $ 62,304 $ 12 $(2,480) $ 59,836
Other securities include stock in the Federal Home Loan Bank totaling
$1,699,000 and $1,572,000 at December 31, 1995 and 1994, respectively.
Proceeds from sales of investment securities and realized gains and losses
were as follows during the three years ended December 31, 1995, 1994 and 1993
(in thousands):
1995 1994 1993
Proceeds from sales $ 487 $21,232 $ 6,018
Gains - 157 61
Losses - 161 42
Maturities of investment securities were as follows at December 31, 1995 (in
thousands). Expected maturities will differ from contractual maturities
because borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties.
Amortized Estimated
Cost Fair Value
Available-for-sale:
Due in one year or less $ 18,386 $ 18,401
Due after one-five years 52,089 52,373
Due after five-ten years 10,752 10,684
Due after ten years 2,105 2,105
83,332 83,563
Mortgage-backed securities 35,766 35,825
Total available-for-sale $119,098 $119,388
Held-to-maturity:
Due in one year or less $ 582 $ 584
Due after one-five years 1,884 1,908
Due after five-ten years 915 917
Total held-to-maturity $ 3,381 $ 3,409
Total $122,479 $122,797
Investment securities carried at approximately $88,030,000 and $88,474,000
at December 31, 1995 and 1994 respectively, were pledged to secure public
deposits and repurchase agreements and for other purposes as permitted or
required by law.
In December 1995, the Company reclassified certain investment securities
between held-to-maturity and available-for-sale in accordance with guidelines
issued by the Financial Accounting Standards Board (FASB) permitting a one-
time change in classification. Based on discussion and analysis, the Company
decided that only local, non-rated municipal securities would be classified as
held-to-maturity and the remaining portfolio would be designated as available-
for-sale. The book value and gross unrealized loss of securities transferred
from held-to-maturity to available-for-sale amounted to $52,536,000 and
$445,000, respectively.
Note 5 - Loans
A summary of loans at December 31, 1995 and 1994 follows (in thousands):
1995 1994
Commercial, financial and agricultural $ 65,916 $ 61,520
Real estate-mortgage 211,147 195,524
Installment 27,996 22,294
Other 1,945 2,815
Total $307,004 $282,153
Certain officers, directors and principal stockholders of the Company and its
subsidiaries, their immediate families or their affiliated companies have
loans with one or more of the subsidiaries. These loans are made in the
ordinary course of business on substantially the same terms, including
interest and collateral, as those prevailing for comparable transactions with
others and do not involve more than the normal risk of collectibility. Loans
to related parties which exceeded $60,000 in the aggregate totaled $10,060,000
at December 31, 1995 and $9,651,000 at December 31, 1994. Activity during
1995 was as follows (in thousands):
Balance at December 31, 1994 $ 9,651
New loans 4,915
Loan repayments (4,506)
Balance at December 31, 1995 $10,060
The aggregate principal balances of nonaccrual, past due and renegotiated
loans were as follows at December 31, 1995 and 1994 (in thousands):
1995 1994
Nonaccrual loans $636 $393
Loans past due ninety days or more and still accruing 554 509
Renegotiated loans which are performing in accordance
with revised terms 604 772
The interest income which would have been recorded under the original terms
of such nonaccrual or renegotiated loans was $143,000, $100,000 and $85,000 in
1995, 1994 and 1993, respectively. The amount of interest income which was
recorded amounted to $56,000 in 1995, $37,000 in 1994 and $15,000 in 1993.
Impaired loans are defined as those loans where it is probable that amounts
due according to contractual terms, including principal and interest, will not
be collected. Both nonaccrual and restructured loans meet this definition.
Impaired loans are measured by the Company at the present value of expected
future cash flows or, alternatively if the loan is collateral dependant, at
the fair value of the collateral. Known losses of principal on these loans
have been charged off. Interest income on nonaccrual loans is recognized only
at the time cash is received. Interest income on restructured loans is
accrued according to the most recently agreed upon contractual terms.
At December 31, 1995, the recorded investment of impaired loans totaled
$1,240,000. There was no related allowance for these impaired loans at
December 31, 1995. The average recorded investment in impaired loans during
the year was $1,076,000. Total interest income which would have been recorded
under the original terms of the impaired loans was $143,000. Total interest
income recorded on a cash basis was $56,000.
The Bank and Heartland enter into financial instruments with off-balance
sheet risk to meet the financing needs of their customers. These financial
instruments include commitments to extend credit in accordance with line of
credit agreements and/or mortgage commitments and standby letters of credit.
Standby letters of credit are conditional commitments issued by a bank to
guarantee the performance of a customer to a third-party. The subsidiaries
evaluate each customer's credit worthiness on a case-by-case basis. The
amount of collateral obtained, if deemed necessary by the subsidiaries upon an
extension of credit, is based on management's evaluation of the credit
worthiness of the borrower. Collateral varies but generally includes assets
such as property, equipment and receivables. At December 31, 1995 and 1994,
respectively, the Company had $29,070,000 and $24,333,000 of outstanding
commitments to extend credit and $1,242,000 and $1,025,000 of standby letters
of credit. Management does not believe that any significant losses will be
incurred in connection with such instruments.
Most of the Company's business activities are with customers located within
east central Illinois. At December 31, 1995 and 1994, the Company's loan
portfolio included $39,720,000 and $38,730,000, respectively, of loans to
borrowers directly related to the agricultural industry.
Mortgage loans serviced for others by Heartland are not included in the
accompanying consolidated balance sheets. The unpaid principal balances of
these loans at December 31, 1995 and 1994 was approximately $43,622,000 and
$39,193,000, respectively.
Note 6 - Allowance for Loan Losses
Changes in the allowance for loan losses were as follows during the three
year period ended December 31, 1995 (in thousands):
1995 1994 1993
Balance, beginning of year $2,608 $2,110 $1,906
Allowance of purchased subsidiary
at date of acquisition - 343 -
Provision for loan losses 280 168 492
Recoveries 112 164 179
Charge offs (186) (177) (467)
Balance, end of year $2,814 $2,608 $2,110
Note 7 - Premises and Equipment, Net
Premises and equipment at December 31, 1995 and 1994 consisted of (in
thousands):
1995 1994
Land $ 2,489 $ 2,399
Buildings and improvements 7,679 7,741
Furniture and equipment 4,881 4,450
Leasehold improvements 340 190
Construction in progress 78 59
15,467 14,839
Accumulated depreciation and amortization 5,980 5,503
Total $ 9,487 $ 9,336
Depreciation expense was $740,000, $672,000 and $720,000 for the years ended
December 31, 1995, 1994 and 1993, respectively.
Note 8 - Intangible Assets
Intangible assets, net of accumulated amortization, at December 31, 1995 and
1994 consisted of (in thousands):
1995 1994
Excess of cost over fair market value of
acquired subsidiaries $ 4,742 $ 5,095
Core deposit premium of acquired subsidiaries 1,277 1,472
Purchased mortgage servicing rights - 60
Total $ 6,019 $ 6,627
Amortization expense was $608,000, $358,000 and $348,000 for the years ended
December 31, 1995, 1994 and 1993, respectively.
Note 9 - Deposits
Total interest expense on deposits for the years ended December 31, 1995,
1994 and 1993 was as follows (in thousands):
1995 1994 1993
Interest-bearing demand $ 2,823 $ 2,764 $ 2,893
Savings 1,107 1,009 1,033
Time 10,958 7,298 7,410
Total $14,888 $11,071 $11,336
As of December 31, 1995, 1994 and 1993, the aggregate amount of time
deposits in denominations of more than $100,000 and the total interest expense
on such deposits was as follows (in thousands):
1995 1994 1993
Outstanding $35,002 $26,451 $19,473
Interest expense for the year 1,963 963 743
Note 10 - Other Borrowings
As of December 31, 1995, 1994 and 1993, other borrowings consisted of (in
thousands):
1995 1994 1993
Securities sold under agreements to repurchase $16,815 $15,590 $ 9,630
Federal Home Loan Bank advances:
Overnight advances 2,200 3,500 -
Fixed term advances due in one year or less 6,000 - -
Fixed term advances due after one year 3,500 - -
Federal funds purchased - 500 -
$28,515 $19,590 $ 9,630
Information concerning such borrowings for the years ended December 31,
1995, 1994 and 1993 was as follows (dollars in thousands):
1995 1994 1993
Maximum amount of borrowings
outstanding at any month end $36,770 $23,460 $11,390
Average amount outstanding 24,114 13,103 8,843
Weighted average interest rate
at year end 5.11% 3.55% 2.91%
Weighted average interest rate
during the year 5.24% 3.59% 2.96%
The Bank and Heartland have collateral pledge agreements whereby they have
agreed to keep on hand at all time, free of all other pledges, liens, and
encumbrances, whole first mortgages on improved residential property with
unpaid principal balances aggregating no less than 167% of the outstanding
advances from the Federal Home Loan Bank.
Note 11 - Long-term Debt
A summary of long-term debt at December 31, 1995 and 1994 was as follows (in
thousands):
1995 1994
Floating rate loan at 1.5% over the Federal funds
rate. Interest due quarterly. Principal payments
due quarterly in various amounts beginning September
30, 1995. The debt matures September 30, 1999.
Effective interest rate of 7.03% at December 31,
1995. $7,200 $7,700
The loan is secured by all of the common stock of the Bank and of Heartland.
The borrowing agreement contains requirements for the Company and the
subsidiaries to maintain various operating and capital ratios and also
contains requirements for prior lender approval for certain sales of assets,
merger activity, the acquisition or issuance of debt and the acquisition of
treasury stock. The company and the subsidiaries were in compliance with the
existing covenants at December 31, 1995. The scheduled principal payments on
the outstanding long-term debt are as follows (in thousands):
1996 $ 1,000
1997 1,125
1998 1,500
1999 3,575
Note 12 - Disclosure of Fair Values of Financial Instruments
Statement of Financial Accounting Standards No. 107 (FAS 107), "Disclosures
about Fair Value of Financial Instruments", requires the disclosure of the
estimated fair value of financial instrument assets and liabilities. For the
Company, as for most financial institutions, most of the assets and
liabilities are considered financial instruments as defined in FAS 107.
However, many of the Company's financial instruments lack an available trading
market as characterized by a willing buyer and seller engaging in an exchange
transaction. Additionally, the Company's general practice and intent is to
hold its financial instruments until maturity and not to engage in trading or
sales activity. Accordingly, significant assumptions and estimations as well
as present value calculations were used by the Company for purposes of the FAS
107 disclosure. Future changes in these assumptions or methodologies may have
a material effect on estimated fair values.
Estimated fair values have been determined by the Company using the best
available information and an estimation methodology suitable for each category
of financial instrument. The estimation methodology used, the estimated fair
values and the carrying amount at December 31, 1995 and 1994 were as follows
(in thousands):
Financial instruments for which an active secondary market exists have been
valued using quoted available market prices.
1995 1994
Fair Carrying Fair Carrying
Value Amount Value Amount
Cash and cash equivalents $ 23,295 $ 23,295 $ 17,713 $ 17,713
Interest bearing deposits
with financial institutions 99 99 99 99
Investments available-for-sale 119,388 119,388 68,973 68,973
Investments held-to-maturity 3,409 3,381 59,836 62,304
Financial instrument liabilities with stated maturities and other borrowings
have been valued at present value, using a discount rate approximating current
market rates for similar assets and liabilities.
1995 1994
Fair Carrying Fair Carrying
Value Amount Value Amount
Deposits with stated maturities $206,062 $204,844 $190,490 $190,453
Other borrowings 28,556 28,515 19,590 19,590
Financial instrument liabilities without stated maturities and floating rate
long-term debt have estimated fair values equal to both the amount payable on
demand and the carrying amount.
1995 1994
Fair Carrying Fair Carrying
Value Amount Value Amount
Deposits with no stated
maturity $192,035 $192,035 $199,115 $199,115
Floating rate long-term debt 7,200 7,200 7,700 7,700
For loans with floating interest rates, it is assumed that the estimated
fair values generally approximate the carrying amount balances. Fixed rate
loans have been valued using a discounted present value of projected cash
flow. The discount rate used in these calculations is the current rate at
which similar loans would be made to borrowers with similar credit ratings and
for the same remaining maturities.
1995 1994
Fair Carrying Fair Carrying
Value Amount Value Amount
Net loan portfolio $304,038 $304,190 $274,231 $279,545
The notational amount of off-balance sheet items such as unfunded loan
commitments and stand-by letters of credit generally approximate their
estimated fair values.
Note 13 - Retirement Plan
The Company has a defined contribution retirement plan which provides for
base contributions of 4% of compensation and a matching contribution by the
Company of up to 50% of the first 4% of voluntary employee contributions.
Employee contributions are limited to 15% of compensation. Prior to December
31, 1993, Heartland had a separate defined contribution retirement plan which
provided for matching contributions of up to 6% of compensation. The total
expense for the two plans was $255,000 in 1993. Effective January 1, 1994,
Heartland's plan was merged with the Company's plan and substantially all
employees of the Company, including the employees of Heartland, are now
covered by the Company's plan and the total expense for the plan amounted to
$285,000 in 1995 and $270,000 in 1994.
Note 14 - Income Taxes
The Company adopted the Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes" (FAS 109) as of January 1, 1993. The cumulative
effect of this change in accounting method of $155,000 was reported in the
consolidated statements of income for the year ended December 31, 1993.
The components of Federal income taxes (benefit) for the three years ended
December 31, 1995, 1994 and 1993 were as follows (in thousands):
1995 1994 1993
Current $1,940 $1,292 $1,475
Deferred (110) 158 (325)
Total $1,830 $1,450 $1,150
There were no state income taxes for 1995, 1994 or 1993. Recorded income
tax expense differs from the expected tax expense (computed by applying the
applicable statutory U.S. Federal tax rate to income before income taxes).
The principle reasons for this difference are as follows (in thousands):
1995 1994 1993
Expected income taxes $1,956 $1,661 $1,461
Effects of:
Tax-exempt income (276) (317) (338)
Nondeductible interest expense 29 28 27
Goodwill amortization 120 35 -
Other items, net 1 43 -
Total $1,830 $1,450 $1,150
The tax effects of the temporary differences that gave rise to significant
portions of the deferred tax assets and deferred tax liabilities at December
31, 1995 and 1994 are presented below (in thousands):
1995 1994
Deferred tax assets:
Allowance for loan losses $ 479 $ 435
Employee benefits 166 112
Available-for-sale investment securities - 566
Other, net 193 136
Total gross deferred tax assets 838 1,249
Less valuation allowance (149) (172)
Net deferred tax assets $ 689 $1,077
Deferred tax liabilities:
Depreciation $ 415 $ 337
Available-for-sale investment securities 99 -
Purchase accounting 160 203
Other, net 70 38
Total gross deferred tax liabilities $ 744 $ 578
Net deferred tax assets (liabilities) $ (55) $ 499
Deferred tax assets and deferred tax liabilities are recorded in other
assets and other liabilities, respectively, on the consolidated balance
sheets.
Note 15 - Dividend Restrictions
Banking regulations impose restrictions on the ability of the Banking
Subsidiaries to pay dividends to the Company. At December 31, 1995,
regulatory approval would have been required for aggregate dividends from the
Bank Subsidiaries to the Company in excess of approximately $5.7 million. The
amount of such dividends that could be paid is further restricted by the
limitations of sound and prudent banking principles.
Note 16 - Commitments and Contingent Liabilities
In the normal course of business, there are various outstanding commitments
and contingent liabilities such as guarantees, commitments to extend credit,
claims and legal actions which are not reflected in the accompanying
consolidated financial statements. In the opinion of management, no
significant losses are anticipated as a result of these matters.
Note 17 -
First Mid-Illinois Bancshares, Inc.
(Parent Company)
Presented below are condensed balance sheets, statements of income and
cash flows for the Parent Company (in thousands):
Balance Sheets:
December 31, 1995 1994
Assets
Cash $ 724 $ 914
Premises and equipment, net 68 55
Investment in subsidiaries 42,045 37,361
Other assets 927 834
Total assets $43,764 $39,164
Liabilities and stockholders' equity
Liabilities:
Dividends payable 420 359
Long-term debt 7,200 7,700
Other liabilities 835 505
Total liabilities 8,455 8,564
Stockholders' equity 35,309 30,600
Total liabilities and stockholders' equity $43,764 $39,164
Statements of Income:
Years ended December 31, 1995 1994 1993
Income:
Dividends from subsidiaries $ 1,369 $1,825 $ 2,509
Other income 25 62 264
1,394 1,887 2,773
Operating expenses 1,266 1,127 1,275
Income before income taxes and equity in distributed earnings of
subsidiaries and cumulative effect of change in accounting 128 760 1,498
principle
Income tax benefit 402 342 290
Income before equity in undistributed earnings of subsidiaries
and cumulative effect of change in accounting principle 530 1,102 1,788
Equity in undistributed earnings of subsidiaires 3,394 2,332 1,483
Net income before cumulative effect of change in accounting 3,924 3,434 3,271
principle
Cumulative effect of change in accounting for income taxes - - 32
Net income $ 3,924 $ 3,434 $ 3,303
Statement of Cash flows:
Years ended December 31, 1995 1994 1993
Cash flows from operating activities:
Net income $ 3,924 $ 3,434 $ 3,303
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, amortization and accretion, net 5 33 33
Equity in undistributed earnings of subsidiaries (3,394) (2,332) (1,483)
(Increase) decrease in other assets (93) 305 (519)
Increase (decrease) in other liabilities 331 2 253
Net cash provided by operating activities 773 1,442 1,587
Cash flows from investing activities:
Investment in subsidiaires - (3,000) -
(Purchases) sales of equipment (18) 27 (33)
Net cash used in investment activities (18) (2,973) (33)
Cash flows from financing activities:
Repayment of long-term debt (500) (300) (500)
Proceeds from long-term borrowings - 3,000 -
Dividends paid on preferred stock (58) (286) (286)
Dividends paid on common stock (387) (658) (701)
Net cash provided by (used in) financing activities (945) 1,756 (1,487)
Increase (decrease) in cash (190) 225 67
Cash at beginning of year 914 689 622
Cash at end of year $ 724 $ 914 $ 689
Statement of Responsibility for Financial Data
Management is responsible for the integrity of all the financial data
included in this Annual Report. The financial statements and related notes
are prepared in accordance with generally accepted accounting principles,
which in the judgement of management are appropriate in the circumstances.
Financial information elsewhere in this Report is consistent with that in the
financial statements.
Management maintains a system of internal accounting control, including an
internal audit program, which provides reasonable assurance that assets are
safeguarded against loss from unauthorized use or disposition, transactions
are properly authorized and accounting records are reliable for the
preparation of financial statements. The foundation of the system of internal
accounting control rests upon careful selection and training of personnel,
segregation of responsibilities and application of formal policies and
procedures that are consistent with the highest standards of business conduct.
The system of internal accounting control is being continuously modified and
improved in response to changes in business conditions and operations.
The Board of Directors has an Audit Committee comprised of six outside
directors. The Committee meets periodically with the independent auditors,
the internal auditors and management to ensure that the system of internal
accounting control is being properly administered and that financial data is
being properly reported. The Committee reviews the scope and timing of both
the internal and external audits, including recommendations made with respect
to the system of internal accounting control by the independent auditors.
The consolidated financial statements, as identified in the accompanying
Independent Auditors' Report, have been audited by KPMG Peat Marwick LLP,
independent certified public accountants. The audits were conducted in
accordance with generally accepted auditing standards, which included tests of
the accounting records and other auditing procedures considered necessary to
formulate an opinion as to the fairness, in all material respects, of the
consolidated financial statements.
Daniel E. Marvin, Jr. William S. Rowland
Chairman and Chief Chief Financial
Executive Officer Officer
Independent Auditors' Report
The Board of Directors
First Mid-Illinois Bancshares, Inc.
Mattoon, Illinois:
We have audited the accompanying consolidated balance sheets of First Mid-
Illinois Bancshares, Inc. and subsidiaries as of December 31, 1995 and 1994,
and the related consolidated statements of income, changes in stockholders'
equity, and cash flows for each of the years in the three-year period ended
December 31, 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of First Mid-
Illinois Bancshares, Inc. and subsidiaries as of December 31, 1995 and 1994,
and the results of their operations and their cash flows for each of the years
in the three-year period ended December 31, 1995 in conformity with generally
accepted accounting principles.
As discussed in notes 1 and 14 to the consolidated financial statements, the
Company changed its method of accounting for income taxes on January 1, 1993,
to adopt the provisions of the Financial Accounting Standards Board's (SFAS)
No. 109, "Accounting for Income Taxes."
KPMG Peat Marwick LLP
Chicago, Illinois
January 26, 1996
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
The following discussion provides additional insight into the financial
condition and the operating results of the Company. The discussion should be
read in conjunction with the consolidated financial statements and other
selected data included elsewhere in the Annual Report.
Overview of Operations
In 1995, the Company reported net income in the amount of $3,924,000, a
14.3% increase over the $3,434,000 reported in 1994. Fully diluted earnings
per share increased 13.1% to $3.88, compared to $3.43 in 1994. A summary of
the significant factors which contributed to the earnings increase follows (in
thousands):
Effect on Earnings, 1995 vs. 1994
Change in:
Net interest income $ 2,230
Provision for loan losses (112)
Other income including securities transactions 204
Other expenses (1,452)
Income taxes (380)
Increase in net income $ 490
When comparing 1995's results with those of 1994, it should be noted that
the October 4, 1994 acquisition of Downstate Bancshares Inc. (Downstate) was
accounted for as a purchase and accordingly, Downstate's operating results
were consolidated with those of the Company for only three months in 1994.
Since the Downstate acquisition increased the overall size of the Company by
approximately $52 million (12%), the effects of this acquisition have an
impact on all year-to-year financial comparisons.
Net Interest Income
Net interest income is the difference between interest and fees earned on
earning assets and the interest paid on deposits and other interest-bearing
liabilities. As illustrated in the following two tables, the Company's net
interest income increased significantly during 1995 and its net interest
margin (computed by dividing tax equivalent net interest income by average
earning assets) increased slightly.
Net interest income increased to $16,740,000 in 1995 from $14,510,000 in
1994 and $13,575,000 in 1993. The increase from 1994 to 1995 is primarily due
to the growth in the Company's loan portfolio, including those loans resulting
from the Downstate acquisition and improved yields on loans and investments.
A summary of the factors which contributed to the $2,230,000 (15.4%) increase
between 1995 and 1994 follows (in thousands):
Increase (Decrease) in Net Interest Income due to:
Total Volume Rate Rate/Volume
Interest earning assets:
Interest bearing time deposits with
financial institutions $ (41) $ (47) $ 71 $ (65)
Due from banks-interest bearin 62 14 29 19
Excess funds sold 200 110 53 37
Investment securities 1,178 (178) 1,371 (15)
Loans 5,638 4,110 1,263 265
7,037 4,009 2,787 241
Interest bearing liabilities:
Deposits 3,817 1,325 2,134 358
Other borrowings 795 398 216 181
Long-term debt 195 139 41 15
4,807 1,862 2,391 554
$2,230 $2,147 $ 396 $ (313)
As seen below, net interest margin increased slightly to 3.98% from 3.93% in
1994 and 3.85% in 1993.
1995 1994 1993
Yield on interest earning assets 7.86% 7.06% 7.13%
Rate on interest bearing liabilities 4.39% 3.53% 3.65%
Net interest margin 3.98% 3.93% 3.85%
Interest Rate Sensitivity
During much of 1995 interest rates continued the increase which began in
1994 following the decline in rates during 1993. The Company monitors its
interest rate sensitivity position to maintain a balance between rate
sensitive assets and rate sensitive liabilities. This balance serves to limit
the adverse effects of changes in interest rates. The Company's
asset/liability management committee oversees the interest rate sensitivity
position and directs the overall allocation of funds. The following table
presents the Company's interest rate sensitivity position at various intervals
at December 31, 1995:
Number of Months Until
Next Repricing Opportunity
0-1 1-3 3-6 6-12 12+
Interest earning assets:
Deposits with other financial $ 784 $ - $ - $ - $ 99
institutions
Excess funds sold 4,975 - - - -
Taxable investment securities 46,928 15,007 7,785 10,792 30,354
Nontaxable investment securities 190 - 217 563 10,933
Loans 31,805 23,033 20,928 34,499 196,739
Total $ 84,682 $ 38,040 $ 28,930 $ 45,854 $ 238,125
Interest bearing liabilities:
Savings and N.O.W. accounts 105,153 - - - -
Money market accounts 35,865 - - - -
Other time deposits 27,518 30,119 40,927 55,046 51,234
Other borrowings 18,515 3,000 500 3,000 3,500
Long-term debt 7,200 - - - -
Total $ 194,251 $ 33,119 $ 41,427 $ 58,046 $ 54,734
Periodic GAP $(109,569) $ 4,921 $ (12,497) $ (12,192) $ 183,391
Cumulative GAP $(109,569) $(104,648) $(117,145) $(129,337) $ 54,054
GAP as a % of interest earning assets:
Periodic (25.2%) 1.1% (2.9%) 2.8% 42.1%
Cumulative (25.2%) (24.0%) (26.9%) (29.7%) 12.4%
Of the $24.9 million growth in the Company's loan portfolio during 1995,
$15.6 million (63%) resulted from real estate loans. Because real estate
loans generally have longer maturities than other loans, the overall maturity
of the portfolio extended during 1995, as can be seen by the following
tabulation:
1995 1994
% of loan portfolio which will not
reprice during the next 12 months 64% 58%
During 1995, the maturity of the Company's deposit base shortened somewhat as
illustrated below:
% of interest bearing deposits
which will not reprice during the
next 12 months 15% 17%
As a result of the changing characteristics of the Company's loan portfolio
and deposit base and to maintain an overall level of interest rate risk
commensurate with the Company's long term risk management strategy, management
shortened the maturity/repricing characteristics of its investment portfolio.
The effect of the strategy can be seen below:
1995 1994
% of investment portfolio repricing
within the next 30 days 38% 32%
At December 31, 1995, the Company was liability sensitive on a cumulative
basis through the twelve-month time horizon. Accordingly, future increases in
interest rates, if any, could have an unfavorable effect on the Company's net
interest margin. However, the Company's historical repricing of N.O.W. and
savings accounts has not, and is not expected to change on a frequent basis
and this would mitigate to some extent the negative effect of an upturn in
rates.
Interest rate sensitivity using a static GAP analysis basis is only one of
several measurements of the impact of interest rate changes on net interest
income used by the Company. Its actual usefulness in assessing the effect of
changes in interest rates varies with the constant changes which occur in the
composition of the Company's earning assets and interest bearing liabilities.
For this reason, the Company uses financial models to project interest income
under various rate scenarios and various assumptions relative to the
prepayments, reinvestment and roll overs of assets and liabilities.
Loan Quality and Allowance for Loan Losses
The provision for loan losses amounted to $280,000 in 1995 as compared to
$168,000 in 1994 and $492,000 in 1993. Net charge-offs amounted to $74,000 in
1995 as compared to $13,000 in 1994 and $288,000 in 1993. On December 31,
1995, the allowance for loan losses amounted to $2,814,000, or .92% of total
loans, and 156.8% of nonperforming loans. At December 31, 1994, the allowance
was $2,608,000, or .92% of total loans, and 155.8% of nonperforming loans.
The allowance for loan losses represents management's best estimate of the
reserve necessary to adequately cover losses that could ultimately be realized
from current loan exposures. The provision for loan losses is the charge
against current earnings that is determined by management as the amount needed
to maintain an adequate allowance for loan losses. In determining the
adequacy of the allowance for loan losses, and therefore the provision to be
charged to current earnings, management relies predominantly on a disciplined
credit review and approval process which extends to the full range of the
Company's credit exposure. The review process is directed by overall lending
policy and is intended to identify, at the earliest possible stage, borrowers
who might be facing financial difficulty. Once identified, the magnitude of
exposure to individual borrowers is quantified in the form of specific
allocations of the allowance for loan losses. Collateral values are
considered by management in the determination of such specific allocations.
Additional factors considered by management in evaluating the overall adequacy
of the allowance include historical net loan losses, the level and composition
of nonaccrual, past due and renegotiated loans and the current and anticipated
economic conditions in the region where the Company operates. In addition to
the aforementioned considerations, management also considers the loan loss
experience of other banks, thrifts and financial services holding companies.
Management recognizes that there are risk factors which are inherent in the
Company's loan portfolio. All financial institutions face risk factors in
their loan portfolios because risk exposure is a function of the business.
The Company's operations (and therefore its loans) are concentrated in east
central Illinois, an area where agriculture is the dominant industry.
Accordingly, lending and other business relationships with agriculture-based
businesses are critical to the Company's success. At December 31, 1995, the
Company's loan portfolio included $39.7 million of loans to borrowers whose
businesses are directly related to agriculture. This increased $1 million
from $38.7 million at December 31, 1994. In addition to agricultural lending,
the Company has historically had substantial residential mortgage lending
activity in and around east central Illinois. At December 31, 1995, these
loans amounted to $153.6 million or 50.0% of total loans. Residential
mortgage loans amounted to $135.5 million or 48.0% of total loans at December
31, 1994.
Other Income
The Company's other income increased slightly to $4,009,000 as compared to
$3,805,000 in 1994 and $3,928,000 in 1993. This increase was primarily due to
the Downstate acquisition in October 1994.
Trust revenues were stable, amounting to $1,118,000 in both 1995 and 1994
and $1,119,000 in 1993. Trust assets increased to $215,903,000 in 1995 from
$182,729,000 in 1994 and $179,745,000 in 1993. Although assets and the number
of trust accounts grew during each of these years, the number of estates and
therefore executor fees on those accounts were less in 1995 than in 1994 and
1993. Accordingly, the growth in assets did not translate directly into
higher revenues.
Revenues from the Company's brokerage and annuity sales decreased in 1995 as
consumer preference shifted away from annuity products when interest rates on
traditional deposit products rose. In 1996 the Company is planning to expand
its product line by offering full-service brokerage services and increasing
its marketing efforts in this area.
Service charges amounted to $1,574,000 in 1995 as compared to $1,456,000 in
1994 and $1,345,000 in 1993. This 8.1% increase in service charges of
$118,000 in 1995 as compared to 1994 is primarily due to the addition of the
Effingham and Altamont business units associated with the Downstate
acquisition. These two business units added $104,000 to service charge income
in 1995 as compared to $21,000 in 1994. The remainder of the increase is
associated with an increased volume in transaction and savings accounts. The
$111,000 increase in service charges between 1994 and 1993 was primarily due
to a new service fee schedule which went into effect September 1, 1994.
Heartland Savings Bank (Heartland) originates loans for its own portfolio
and for sale to others. Mortgage banking income from loans originated and
subsequently sold into the secondary market amounted to $273,000 in 1995 as
compared to $158,000 in 1994 and $517,000 in 1993. In 1995 the volume of
loans sold by Heartland was $11 million representing 189 loans as compared to
$5 million in 1994 representing 92 loans.
Other Expense
The Company's non-interest expense amounted to $14,715,000 in 1995 as
compared to $13,263,000 in 1994, an increase of $1,452,000 (10.9%). Non-
interest expense increased $550,000 (4.33%) in 1994 from $12,713,000 in 1993.
Of the $1,452,000 increase between 1995 and 1994, $520,000 related to
increased costs for salaries and benefits. In addition to merit and incentive
increases for continuing employees, the Downstate acquisition increased the
Company's full-time equivalent number of employees by approximately 10%.
The cost of insurance premiums assessed by the Federal Deposit Insurance
Corporation (FDIC) was $590,000 in 1995, compared to $802,000 in 1994 and
$729,000 in 1993. The 1995 decrease was the result of a refund the FDIC
premium paid in the third quarter of 1995 in the amount of $170,000 and a
reduced assessment rate for the second half of 1995. On August 8, 1995, the
FDIC amended its regulations to change the range of deposit insurance
assessments charged to members of the Bank Insurance Fund (BIF) from the then-
prevailing range of .23 % to .31% of deposits, to a range of .04% to .31% of
deposits. This significantly reduced the Company's insurance premiums to the
FDIC. The 1994 increase was directly related to deposit growth, since the
assessment rate paid by the Company's banking subsidiaries had been unchanged
during those years. Premium rates for 1995 range from .04% to .31% of average
deposits, with higher risk institutions paying a higher premium. The
Company's bank subsidiaries, First Mid-Illinois Bank & Trust, N.A. (Bank) and
Heartland, have been assessed at the lowest possible rates. The Bank (a BIF
insured institution) has an assessment rate of .04% of average deposits, while
Heartland (a Savings Association Insurance fund (SAIF) insured institution)
has an assessment rate of .23% of average deposits.
Under terms of proposed legislation being considered in Congress to
recapitalize SAIF, the Company may be subject to a one-time assessment for
deposits which were acquired in 1992 when Heartland became a subsidiary of the
Company. If this legislation is enacted in its present form in 1996, this
special assessment would reduce the Company's 1996 net income by approximately
$600,000.
Income Taxes
Income tax expense amounted to $1,830,000 in 1995 as compared to $1,450,000
in 1994 and $1,150,000 in 1993. Effective tax rates were 31.8%, 29.7% and
26.8% respectively, for those years. The Company's effective tax rate has
continued to increase slightly each year as the relative percentage of tax-
exempt income decreases.
The Company adopted the provisions of FAS 109 effective January 1, 1993.
The cumulative effect of this accounting principle change amounted to
$155,000, which was recognized during the first quarter of 1993.
Capital Resources
At December 31, 1995, the Company's stockholders' equity amounted to
$35,309,000, a $4,709,000 or 15.4% increase from the $30,600,000 balance as of
December 31, 1994. During the year, net income contributed $3,924,000 to
equity before the payment of dividends to common and preferred stockholders
amounting to $1,008,000. The change in net unrealized gain on available-
for-sale investment securities increased stockholders' equity by $1,290,000,
net of tax.
In late 1994, the Company implemented a Dividend Reinvestment Plan whereby
common and preferred shareholders could elect to have their cash dividends
automatically reinvested into newly-issued common shares of the Company. This
plan became effective with the January, 1995 common dividend. Of the
$1,008,000 in common and preferred dividends paid during 1995, $503,000 or
49.9% was reinvested into shares of common stock of the Company through the
Dividend Reinvestment Plan. This resulted in an additional 16,222 shares of
common stock being issued during 1995.
The Company and its subsidiaries have capital ratios which are above the
regulatory capital requirements. These requirements call for a minimum total
risk-based capital ratio of 8% and a minimum leverage ratio of 3% for the most
highly rated banks that do not expect significant growth. All other
institutions are required to maintain a ratio of Tier 1 capital to total
assets of 4% to 5% depending on their particular circumstances and risk
profiles. At December 31, 1995, the Company's leverage ratio was 6.24%.
A tabulation of the Company's and its subsidiaries' risk-based capital
ratios as of December 31, 1995 follows:
Tier One
Risk-Based Total Risk-Based
Capital Ratio Capital Ratio
First Mid-Illinois Bancshares, Inc.
(Consolidated) 10.5% 11.5%
First Mid-Illinois Bank & Trust, N.A. 12.1% 13.2%
Heartland Savings Bank 16.0% 16.8%
Banks and bank holding companies are generally expected to operate at or
above the minimum capital requirements. These ratios are in excess of
regulatory minimums and will allow the Company to operate without capital
adequacy concerns.
Upon ratification by the shareholders in May 1996, the Company will begin
issuing First Mid-Illinois Bancshares' stock as part of a deferred
compensation plan for its directors and certain senior officers. The Company
registered 100,000 shares of stock with the Securities and Exchange Commission
for the Deferred Compensation Plan.
Liquidity
Liquidity represents the ability of the Company and its subsidiaries to meet
the requirements of customers for loans and deposit withdrawals. Liquidity
management focuses on the ability to obtain funds economically for these
purposes and to maintain assets which may be converted into cash at minimal
costs. Management monitors its expected liquidity requirements carefully,
focusing primarily on cash flows from operating, investing and financing
activities.
A summary of the Company's cash flows from these sources for 1995, 1994 and
1993 follows (in thousands):
Cash and cash equivalents provided by (used in):
1995 1994 1993
Operating Activities $ 5,864 $ 5,706 $ 6,768
Investing Activities (15,573) (14,297) 1,630
Financing Activities 15,291 4,887 (2,964)
Net Cash Flows $ 5,582 $ (3,704) $ 5,434
In addition to liquidity provided by operating, financing and investing
activities, the Company has other sources of liquidity, including unpledged
available-for-sale investment securities and formalized line of credit
arrangements with correspondent banks. From these sources, management has the
ability to generate approximately $70 million in an economical manner for
liquidity purposes.
Effects of Inflation
Unlike industrial companies, virtually all of the assets and liabilities of
the Company are monetary in nature. As a result, interest rates have a more
significant impact on the Company's performance than the effects of general
levels of inflation. Interest rates do not necessarily move in the same
direction or experience the same magnitude of changes as goods and services,
since such prices are effected by inflation. In the current economic
environment, liquidity and interest rate adjustments are features of the
Company's assets and liabilities which are important to the maintenance of
acceptable performance levels. The Company attempts to maintain a balance
between monetary assets and monetary liabilities, over time, to offset these
potential effects.
Future Accounting Changes
In May 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 122, "Accounting for Mortgage
Servicing Rights" (FAS 122). FAS 122 amends FASB Statement No. 65 by
establishing a new standard for capitalizing mortgage servicing rights. Under
FAS 122, the accounting principles for mortgage servicing rights are the same
for mortgages originated by the servicer as for those acquired through
purchase transactions. Accordingly, under the new standard, the Company will
record an asset for mortgage servicing rights when it sells mortgages and
retains the servicing. Mortgage servicing rights are to be amortized in
proportion to the net servicing income over the period during which servicing
income is expected to be received. Servicing rights are to be evaluated for
impairment based on fair value. FAS 122 is required to be applied
prospectively to transactions in fiscal years beginning after December 15,
1995. The Company will adopt FAS 122 effective January 1, 1996. Management
believes that the impact of the adoption of FAS 122 will not have a material
effect on the consolidated financial statements of the Company.
FAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of" will be effective for financial statements for
the fiscal years beginning after December 15, 1995. FAS 121 requires entities
to perform separate calculations for long-lived assets to determine whether
recognition of an impairment loss is required and, if so, to measure that
impairment. All long-lived assets for which management has committed to a
plan to dispose of, shall be reported at the lower of cost or fair value less
costs to sell. Management believes that the impact of the adoption of FAS 121
will not have any impact on the financial position of the Company.
Common Stock Information and Dividends
The Company's common stock was held by approximately 740 shareholders of
record, as of December 31, 1995, and is traded in the over-the-counter market.
The following table shows, for the indicated periods, the range of prices
per share of the Company's common stock in the over-the-counter market. These
quotations represent interdealer prices without retail mark-ups, mark-downs or
commissions and do not necessarily represent actual transactions.
Quarter High Bid Low Ask
1995
1st $ 27 $ 28
2nd 29 30
3rd 33 32
4th 33 34
Quarter High Bid Low Ask
1994
1st $ 25 $ 26
2nd 25 26
3rd 25 27
4th 25 27
Cash dividends have been declared by the Board of Directors of the Company
semi-annually during the two years ended December 31, 1995.
The following table sets forth the cash dividends per share paid on the
Company's common stock for the past two years.
Date Paid Amount per Share
June 20, 1994 $.34
January 3, 1995 $.41
June 20, 1995 $.34
January 3, 1996 $.47
Stockholders' Information
Transfer and Dividend Paying Agent
Stockholders should direct inquiries concerningdividend checks or their
stockholder records to:
Harris Trust and Savings Bank
P.O. Box A3309
Chicago, Illinois 60690
(312) 461-7447
Dividend Reinvestment Plan
For information concerning the Company's Dividend Reinvestment Plan,
contact:
Harris Trust and Savings Bank
P.O. Box A3309
Chicago, Illinois 60690
(312) 461-7447
Annual Meeting of Stockholders
The annual meeting of stockholders will be May 15, 1996 at 11:00 a.m. at the
Mattoon Ramada Inn, 300 Broadway Avenue East, Mattoon, Illinois.
Form 10-K
Upon written request of any stockholder, the Company will provide, without
charge, a copy of its 1995 Annual Report on Form 10-K, including financial
statements and schedules, as required to be filed with the Securities and
Exchange Commission.
To obtain a copy of the Form 10-K, please send a written request to Mr.
William S. Rowland, Chief Financial Officer, First Mid-Illinois Bancshares,
Inc., 1515 Charleston Avenue, P.O. Box 499, Mattoon, Illinois, 61938.
Directors
Directors of First Mid-Illinois Bancshares, Inc.
Charles A. Adams
President, Howell Paving, Inc. and Vice President, Howell Asphalt Co.
Kenneth R. Diepholz
Owner, D-Co Oil and President, Diepholz Chevrolet, Oldsmobile, Cadillac and
GEO
Richard A. Lumpkin
Chairman, Consolidated Communications Inc.
Daniel E. Marvin, Jr.
Chairman of the Board, President and Chief Executive Officer, First Mid-
Illinois Bancshares, Inc.
Gary W. Melvin
Co-Owner Rural King Stores
William G. Roley
Retired
William S. Rowland
Chief Financial Officer, Secretary/Treasurer, First Mid-Illinois Bancshares,
Inc.
Ray A. Sparks
President, Electric Lab and Sales Corp.
Directors of First Mid-Illinois Bank & Trust, N.A.
Charles A. Adams
President, Howell Paving, Inc. and Vice President, Howell Asphalt Co.
Dan R. Cunningham
Executive Vice President, First Mid-Illinois Bank & Trust, N.A. and Mattoon
Community President
Kenneth R. Diepholz
Owner, D-Co Oil and President, Diepholz Chevrolet, Oldsmobile, Cadillac and
GEO
John A. Dively
Retired
Richard A. Lumpkin
Chairman, Consolidated Communications Inc.
Daniel E. Marvin, Jr.
Chairman of the Board, President and Chief Executive Officer, First Mid-
Illinois Bancshares, Inc.
Gary W. Melvin
Co-Owner Rural King Stores
William G. Roley
Retired
Fred F. Uphoff
Farmer
Directors, Heartland Savings Bank
Ronald E. Batterham
Retired
Roger W. Dettro
Dentist and former Mayor of Mattoon, Illinois
Stanley E. Gilliland
Vice President-Lending, First Mid-Illinois Bancshares, Inc. and Executive Vice
President, First Mid-Illinois Bank & Trust, N.A.
Robert F. Jones
President, The Checkley Agency
Daniel E. Marvin, Jr.
President and CEO, First Mid-Illinois Bancshares, Inc. and First Mid-Illinois
Bank & Trust, N.A.
Robert M. Ronchetti
President, Ronchetti Distributing Company
William S. Rowland
Chief Financial Officer, First Mid-Illinois Bancshares, Inc. and Executive
Vice President, First Mid-Illinois Bank & Trust, N.A.
Ray A. Sparks
President, Electric Labs and Sales Corp.
Andrew P. Zavarella
Executive Vice President and Managing Officer, Heartland Savings Bank
Senior Officers
Daniel E. Marvin, Jr.
President and CEO, First Mid-Illinois Bancshares, Inc. and First Mid-Illinois
Bank & Trust, N.A.
William S. Rowland
Chief Financial Officer, First Mid-Illinois Bancshares, Inc. and Executive
Vice President, First Mid-Illinois Bank & Trust, N.A.
Stanley E. Gilliland
Vice President-Lending, First Mid-Illinois Bancshares, Inc. and Executive Vice
President, First Mid-Illinois Bank & Trust, N.A.
Dan R. Cunningham
Executive Vice President and Mattoon Community President, First Mid-Illinois
Bank & Trust, N.A.
Alfred M. Wooleyhan, Jr.
Executive Vice President, First Mid-Illinois Bank & Trust, N.A.
Randall H. Ross
Senior Vice President, First Mid-Illinois Bank &Trust, N.A.
Laurel G. Allenbaugh
Vice President and Controller, First Mid-Illinois Bancshares, Inc.
Gary J. Boske
Vice President, First Mid-Illinois Bank & Trust, N.A.
Christie L. Burich
Vice President and Investment Manager, First Mid-Illinois Bancshares, Inc.
Janet L. Grove
Vice President and Senior Trust Officer, First Mid-Illinois Bank & Trust, N.A.
Sherry L. Hingten
Senior Loan Officer, Heartland Savings Bank
Christopher L. Slabach
Auditor, First Mid-Illinois Bancshares, Inc.
Robert E. Weber, Jr.
Senior Vice President, First Mid-Illinois Bank & Trust, N.A.
Andrew P. Zavarella
Executive Vice President and Managing Officer, Heartland Savings Bank
James O. Baker
Effingham Community President, First Mid-Illinois Bank & Trust, N.A.
Mark A. Bluhm
Charleston Community President, First Mid-Illinois Bank & Trust, N.A.
Daniel D. Downs
Arcola Manager, First Mid-Illinois Bank & Trust, N.A.
Janet E. Hamilton
Altamont Manager, First Mid-Illinois Bank & Trust, N.A.
Gary L. Kuhns
Neoga Community President, First Mid-Illinois Bank & Trust, N.A.
Douglas R. McCumber
Tuscola Community President, First Mid-Illinois Bank & Trust, N.A.
Larry D. Stenger
Sullivan Community President, First Mid-Illinois Bank & Trust, N.A.
Community Banking Directors
Charleston
Mark A. Bluhm
Charleston Community President
John A. Dively
Retired
Dr. Charles R. Maris
Physician
J. W. Oglesby
Retired
L. Stephen Whitley
Retired
Neoga
Clyde E. Drennan
Retired
Gary L. Kuhns
Neoga Community President
Melvin C. Lockard
Retired
Richard L. Peters
Farmer
James W. Short
President, Short Furniture, Inc.
James E. Zimmer
District Representative, Monsanto Corp.
Effingham
Dr. Peter M. Bonutti
Physician
Donald G. Cunningham
Retired
C. Ron Greene
CFO, Effingham Truck Sales, Inc.
Paul O. Wendling
Owner/President of Direct Lines
Michael D. Yager
Owner/President, Mid-America Designs, Inc.
James O. Baker
Effingham Community President
Sullivan
Richard C. Atchison
Owner, Atchison Electric, Inc.
William G. Roley
Retired
Larry D. Stenger
Sullivan Community President
Kurt W. VanDeursen
Owner, Coast-to-Coast Hardware of Sullivan
Terry P. Warren
Farmer
Ronald D. White
Pharmacist
Tuscola
Laverl Byers
Farmer
Dr. Stanley L. Cross
Dentist
Paul R. Flock
Owner, Flock Electronics
Douglas R. McCumber
Tuscola Community President
Charles M. Rogers
Owner, Kelsey Furniture, Inc.
Altamont
Dale A. Laue
Farmer
Ruth Ann Hoffmeister
Altamont City Commissioner
Darrell J. Kuhns
Farmer
Gerald L. Quade
Farmer
Donald L. Wendling
Don's Floor Covering & Refrigeration
Janet E. Hamilton
Altamont Manager
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934 (Amendment No. __)
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (section) 240.14a-11(c) or
(section) 240.14a-12
FIRST MID-ILLINOIS BANCSHARES, INC.
(Name of Registrant as Specified In Its Charter)
Mr. William S. Rowland, Chief Financial Officer of the Registrant
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined:
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
April 12, 1996
Dear Fellow Stockholder:
On behalf of the Board of Directors and management of First Mid-Illinois
Bancshares, Inc., I cordially invite you to attend the Annual Meeting of
Stockholders of First Mid-Illinois Bancshares, Inc. to be held at 11:00 a.m.
on May 15, 1996, at the Ramada Inn located at 300 Broadway Avenue, Mattoon,
Illinois. The accompanying Notice of Annual Meeting of Stockholders and Proxy
Statement discuss the business to be conducted at the meeting. We have also
enclosed a copy of the Company's 1995 Annual Report to Stockholders. At the
meeting we shall report on Company operations and the outlook for the year
ahead.
Your Board of Directors has nominated two persons to serve as Class I
directors. Both of the nominees are incumbent directors. The Board also
recommends that you approve the adoption of a deferred compensation plan, as
set forth in the accompanying Proxy Statement. In addition, the Company's
management has selected and recommends that you ratify the selection of KPMG
Peat Marwick LLP to continue as the Company's independent public accountants
for the year ending December 31, 1996.
We recommend that you vote your shares for the director nominees and in
favor of the proposals.
I encourage you to attend the meeting in person. Whether or not you plan
to attend, however, please complete, sign and date the enclosed proxy and
return it in the accompanying postpaid return envelope as promptly as
possible. This will ensure that your shares are represented at the meeting.
If you have any questions concerning these matters, please do not
hesitate to contact me at (217) 234-7454. We look forward with pleasure to
seeing and visiting with you at the meeting.
Very truly yours,
FIRST MID-ILLINOIS BANCSHARES, INC.
Daniel E. Marvin, Jr.
Chairman
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 15, 1996
FIRST MID-ILLINOIS BANCSHARES, INC.
1515 Charleston Avenue
P.O. Box 499
Mattoon, Illinois 61938
(217) 234-7454
To the stockholders of FIRST MID-ILLINOIS BANCSHARES, INC.
The Annual Meeting of the Stockholders of First Mid-Illinois Bancshares,
Inc., a Delaware corporation (the "Company"), will be held at the RAMADA INN,
300 Broadway Avenue, East in Rooms A, B and C, Mattoon, Illinois, on
Wednesday, May 15, 1996, at 11:00 a.m., local time, for the following
purposes:
1. to elect two Class I directors for a term of three years.
2. to approve the adoption of the First Mid-Illinois Bancshares, Inc.
Deferred Compensation Plan.
3. to approve the appointment of KPMG Peat Marwick LLP as independent
public accountants for the Company for the fiscal year ending
December 31, 1996.
4. to transact such other business as may properly be brought before
the meeting and any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on April 1, 1996,
as the record date for the determination of stockholders entitled to notice
of, and to vote at, the meeting.
By order of the Board of Directors
Daniel E. Marvin, Jr.
Chairman
Mattoon, Illinois
April 12, 1996
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of First Mid-Illinois Bancshares, Inc. (the "Company")
of proxies to be voted at the Annual Meeting of Stockholders to be held at the
Ramada Inn, 300 Broadway Avenue, East in Rooms A, B and C, Mattoon, Illinois,
on Wednesday, May 15, 1996, at 11:00 a.m., local time, and at any adjournments
or postponements thereof.
The Board of Directors would like to have all stockholders represented at
the meeting. If you do not expect to be present, please sign and mail your
proxy card in the enclosed self-addressed, stamped envelope. You have the
power to revoke your proxy at any time before it is voted, and the giving of a
proxy will not affect your right to vote in person if you attend the meeting.
The mailing address of the Company*s principal executive offices is 1515
Charleston Avenue, P.O. Box 499, Mattoon, Illinois 61938. This Proxy
Statement and the accompanying proxy card are being mailed to stockholders on
or about April 12, 1996. The 1995 Annual Report of the Company, which
includes consolidated financial statements of the Company, is enclosed.
The Company is a diversified financial services company which serves the
financial needs of east central Illinois. It is the parent company of First
Mid-Illinois Bank & Trust, N.A. (the "Bank"), a regional banking entity which
has locations in Mattoon, Altamont, Effingham, Charleston, Sullivan, Tuscola,
Arcola and Neoga, Illinois. The Company is also the holding company for
Heartland Savings Bank, an Illinois savings bank located in Mattoon and
Urbana, Illinois ("Heartland"). Mid-Illinois Data Services, Inc., a data
processing company ("MIDS"), is a wholly owned nonbanking subsidiary of the
Company. The Bank, Heartland and MIDS are sometimes referred to as the
"Subsidiaries."
Only holders of record of the Company*s Common Stock, par value $4.00 per
share (the "Common Stock"), at the close of business on April 1, 1996 will be
entitled to vote at the annual meeting or any adjournments or postponements of
such meeting. On April 1, 1996, the Company had 898,268 shares of Common
Stock, and 620 shares of Preferred Stock, no par value (the "Preferred
Stock"), issued and outstanding. In the election of directors, and for all
other matters to be voted upon at the annual meeting, each issued and
outstanding share of Common Stock is entitled to one vote. Holders of the
Preferred Stock are not entitled to vote their Preferred Stock at the annual
meeting. All shares of Common Stock represented at the annual meeting by
properly executed proxies received prior to or at the annual meeting, and not
revoked, will be voted at the meeting in accordance with the instructions
thereon. If no instructions are indicated, properly executed proxies will be
voted for the nominees and for adoption of the proposals set forth in this
Proxy Statement.
A majority of the shares of the Common Stock, present in person or
represented by proxy, shall constitute a quorum for purposes of the annual
meeting. Abstentions and broker non-votes will be counted for purposes of
determining a quorum. Directors shall be elected by a plurality of the votes
present in person or represented by proxy. In all matters other than the
election of directors, the affirmative vote of the majority of shares present
in person or represented by proxy at the annual meeting and entitled to vote
on the subject matter shall be required to constitute stockholder approval.
Abstentions will be treated as votes against a proposal and broker non-votes
will have no effect on the vote.
ELECTION OF DIRECTORS
At the Annual Meeting of the Stockholders to be held on May 15, 1996, the
stockholders will be entitled to elect two (2) Class I directors for a term
expiring in 1999. The directors of the Company are divided into three classes
having staggered terms of three years. Both of the nominees for election as
Class I directors are incumbent directors. The Company has no knowledge that
any of the nominees will refuse or be unable to serve, but if any of the
nominees becomes unavailable for election, the holders of the proxies reserve
the right to substitute another person of their choice as a nominee when
voting at the meeting. Set forth below is information, as of April 1, 1996,
concerning the nominees for election and for the other persons whose terms of
office will continue after the meeting, including age, year first elected a
director of the Company and business experience during the previous five years
of each. The two nominees, if elected at the annual meeting, will serve as
Class I directors for three year terms expiring in 1999.
Nominees
Director Position with the Company and the Subsidiaries
Name (Age) Since and Occupation for the Last Five Years
CLASS I
(Term Expires 1999)
Kenneth R. Diepholz 1990 Director of the Bank (since 1984) and of the Company;
President,
(Age 57) Diepholz Chevrolet, Oldsmobile, Cadillac and Geo and
Owner, D-Co
Coin Laundry and Diepholz Rentals.
Gary W. Melvin 1990 Director of the Bank (since 1984) and of the Company;
Director of
(Age 46) MIDS (since 1987); Co-Owner, Rural King Stores.
Continuing Directors
Director Position with the Company and the Subsidiaries
Name (Age) Since and Occupation for the Last Five Years
CLASS II
(Term Expires 1997)
Richard Anthony Lumpkin 1982 Director of the Bank (since 1966) and of the Company;
Chairman of
(Age 61) the Board of Consolidated Communications Inc.,
Director CIPSCO
Incorporated (since 1995).
William G. Roley 1985 Director of the Bank (since 1992) and of the Company;
retired,
(Age 66) former owner of Roley Real Estate.
William S. Rowland 1991 Chief Financial Officer, Secretary (since 1991),
Treasurer
(Age 49) (since 1989) and Director of the Company; Director of
MIDS
(since 1989); and of Heartland (since 1992); Executive
Vice
President of the Bank (since 1989).
CLASS III
(Term Expires 1998)
Charles A. Adams 1984 Director of the Bank (since 1989), of MIDS (since
1987) and of the
(Age 54) Company; Vice President, Howell Asphalt Company and
President,
Howell Paving Inc.
Daniel E. Marvin, Jr. 1982 Chairman, President, Chief Executive Officer and
Director of the
(Age 57) Company; Director (since 1980), Chairman, President
and Chief
Executive Officer (since 1983) of the Bank; Director
of MIDS
(1987-1992); Director, Chairman (since 1992) and
President
(since 1994) of Heartland.
Ray Anthony Sparks 1994 Director of the Company; Director of Heartland (since
1992);
(Age 39) President of Elasco Agency Sales, Inc. and Electrical
Laboratories and Sales Corporation.
All of the Company*s directors will hold office for the terms indicated,
or until their respective successors are duly elected and qualified, and all
executive officers hold office for a term of one year. There are no
arrangements or understandings between any of the directors, executive
officers or any other person pursuant to which any of the Company*s directors
or executive officers have been selected for their respective positions.
Directors of the Company received a $1,500 quarterly retainer for serving
on the Board of Directors in 1995, except Mr. Rowland, who is not separately
compensated for his service on the board. Additionally, the Bank provides a
pension to certain Bank directors who have served for a minimum of ten years
and have attained the age of 65 or older and who were not serving as an
officer of the Bank upon retirement. The pension is equal to 75% of the
regular directors' meeting fees paid to current directors, based upon fourteen
regular meetings in each fiscal year.
Board Committees and Meetings
The Board of Directors of the Company has established an audit committee
and a compensation committee. These committees are composed entirely of
outside directors. The Board has also created other company-wide committees
composed of officers of the Company and the Subsidiaries.
Members of the audit committee are Messrs. Adams, Diepholz, Lumpkin,
Melvin, Roley and Sparks. The audit committee reports to the Board of
Directors and has the responsibility to review and approve internal control
procedures, accounting practices and reporting activities of the Subsidiaries.
The committee also has the responsibility for establishing and maintaining
communications between the Board and the independent auditors and regulatory
agencies. The audit committee reviews with the independent auditors the scope
of their examinations, with particular emphasis on the areas to which either
the audit committee or the auditors believe special attention should be
directed. It also reviews the examination reports of regulatory agencies and
reports to the full Board regarding matters discussed therein. Finally, it
oversees the establishment and maintenance of effective controls over the
business operations of the Subsidiaries. The Audit Committee met four times
in 1995.
The members of the compensation committee are Messrs. Adams, Diepholz,
Lumpkin, Melvin, Roley and Sparks. The compensation committee reports to the
Board of Directors and has responsibility for all matters related to
compensation of executive officers of the Company, including review and
approval of base salaries, conducting a review of salaries of executive
officers compared to other financial services holding companies in the region,
fringe benefits, including modification of the retirement plan, and incentive
compensation. The compensation committee met four times in 1995.
A total of ten regularly scheduled and special meetings were held by the
Board of Directors of the Company during 1995. During 1995, all directors
attended at least 75 percent of the meetings of the Board and the committees
on which they served.
Transactions With Management
Directors and officers of the Company and the Subsidiaries and their
associates, were customers of and had transactions with the Company and the
Subsidiaries during 1995. Additional transactions may be expected to take
place in the future. All outstanding loans, commitments to loan, transactions
in repurchase agreements and certificates of deposit and depository
relationships, in the opinion of management, were made in the ordinary course
of business, on substantially the same terms, including interest rates and
collateral, as those prevailing at the time or comparable transactions with
other persons and did not involve more than the normal risk of collectibility
or present other unfavorable features.
EXECUTIVE COMPENSATION
The following table shows the compensation earned for the last three
fiscal years by the Chief Executive Officer and those executive officers of
the Company and the Subsidiaries whose 1995 salary and bonus exceeded
$100,000:
SUMMARY COMPENSATION TABLE Annual Compensation
(a) (b) (c) (d) (e)
Name and Principal Position Fiscal Year
Ended All Other
December 31st Salary($)(1) Bonus($) Compensation($)
Daniel E. Marvin, Jr., President and 1995 $ 164,000 $ 48,163 $ 26,001 (2)
Chief Executive Officer 1994 160,255 35,040 23,048 (2)
1993 150,255 33,862 24,328 (2)
William S. Rowland, Chief Financial 1995 $ 101,000 $ 21,651 $ 11,940 (3)
Officer 1994 96,000 13,590 11,971 (3)
1993 85,000 12,844 10,947 (3)
Dan R. Cunningham, Vice President 1995 $ 93,000 $ 13,857 $ 6,411 (4)
1994 90,000 11,970 6,582 (4)
1993 80,000 11,000 5,429 (4)
Stanley E. Gilliland, Vice President 1995 $ 86,000 $ 15,738 $ 6,103 (4)
1994 82,260 12,636 5,477 (4)
1993 75,000 11,231 4,819 (4)
(1) Includes deferred amounts.
(2) Represents the Company's contributions to its retirement plan and the
premium payments for an insurance policy purchased to fund a supplemental
retirement and death benefit for Mr. Marvin. These amounts were $12,720 and
$13,281 for 1995, $10,874 and $12,174 for 1994 and $11,047 and $13,281 for
1993, respectively.
(3) Represents the Company's contributions to its retirement plan and the
premium payments for an insurance policy purchased to fund a supplemental
retirement and death benefit for Mr. Rowland. These amounts were $6,060 and
$5,880 for 1995, $6,091 and $5,800 for 1994 and $5,067 and $5,800 for 1993,
respectively.
(4) Represents the Company's contributions to its retirement plan.
The Compensation Committee has furnished the following report on
executive compensation. The incorporation by reference of this Proxy
Statement into any document filed with the Securities and Exchange Commission
by the Company shall not be deemed to include such report unless the report is
specifically stated to be incorporated by reference into such document.
Compensation Committee Report
As members of the Compensation Committee, it is our duty to evaluate the
performance of management, review total management compensation levels and
consider management succession and other related matters. The Committee
reviews and approves in detail all aspects of compensation for the nine
highest paid officers within the Company and uses state, regional and national
salary studies to ascertain existing market conditions for personnel. No
member of the Committee is a former or current officer or employee of the
Company or any of the Subsidiaries.
The compensation philosophy of the Company is that a portion of the
annual compensation of each officer relates to and must be contingent upon the
performance of the Company, as well as the individual contribution of each
officer. As a result, a portion of each executive officer's annual
compensation is based upon the officer's performance, the performance of the
operating unit for which the officer has primary responsibility and the
performance of the Company as a whole. In 1993, the formulas for measuring
performance and awarding bonuses were refined and improved so as to more
objectively link financial and individual performance with bonus amounts.
During 1995, the Company's earnings improved and its market share
increased significantly. Additionally, various other improvements were made
in the Company's operating and administrative functions. Accordingly, Messrs.
Marvin, Rowland, Cunningham and Gilliland were awarded incentive bonuses of
$48,163, $21,651, $13,857 and $15,738, respectively. The relationships
between the base salaries and incentive compensation of Messrs. Marvin,
Rowland and Cunningham for 1995, 1994 and 1993 were as follows:
Incentive compensation as a % of Base Salary
1995 1994 1993
Mr. Marvin 29% 22% 23%
Mr. Rowland 21% 15% 15%
Mr. Cunningham 15% 13% 14%
Mr. Gilliland 18% 15% 15%
Submitted by the Compensation Committee Members
Charles A. Adams
Kenneth R. Diepholz
Richard A. Lumpkin
Gary W. Melvin
William G. Roley
Ray Anthony Sparks
The incorporation by reference of this Proxy Statement into any document
filed with the Securities and Exchange Commission by the Company shall not be
deemed to include the following performance graph and related information
unless the graph and related information are specifically stated to be
incorporated by reference into such document.
Performance Graph
The line graph below compares the cumulative total stockholder return on
a $100 investment in the Company's Common Stock to the cumulative total return
of the S & P 500 Index and the Nasdaq Bank Stock Index for the period December
31, 1990 through December 31, 1995. The S&P 500 Index and the Nasdaq Bank
Stock Index were calculated at the Company's request by Research Data Group,
San Francisco, California.
CUMULATIVE TOTAL RETURN *
12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
First Mid-Illinois $100 $100 $153 $200 $206 $272
Bancshares, Inc.
Nasdaq Bank Stocks $100 $164 $239 $272 $271 $404
S&P 500 $100 $130 $140 $155 $157 $215
* Total return assumes reinvestment of dividends
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the
Company*s Common Stock beneficially owned on April 1, 1996 with respect to all
persons known to the Company to be the beneficial owner of more than five
percent of the Company Common Stock, each director and nominee, each executive
officer named in the Summary Compensation Table and all directors and
executive officers of the Company as a group.
Name of Individual and Amount and Nature of Percent
Number of Persons in Group Beneficial Ownership (1) of Class
5% Stockholders
Margaret Lumpkin Keon 65,418 (2) 7.2%
16 Miller Avenue, Suite 203
Mill Valley, California 94941
Mary Lumpkin Sparks 91,687 (3) 10.1%
2438 Campbell Road, N.W.
Alburquerque, New Mexico 87104
Directors
Charles A. Adams 55,758 (4) 5.9%
Kenneth R. Diepholz 15,481 (5) 1.7%
Richard Anthony Lumpkin 187,365 (6) 20.2%
Daniel E. Marvin, Jr. 11,357 (7) 1.3%
Gary W. Melvin 38,912 (8) 4.2%
William G. Roley 16,773 (9) 1.8%
William S. Rowland 3,246 (10) *
Ray Anthony Sparks 5,483 (11) *
Other Named Executive Officers
Dan R. Cunningham 1,879 (12) *
Stanley E. Gilliland 2,177 (13) *
All directors and executive officers
as a group (11 persons) 338,535 (14) 33.8%
* Less than one percent.
(1) The information contained in this column is based upon information
furnished to the Company by the persons named above and the members of the
designated group. The nature of beneficial ownership for shares shown in this
column is sole voting and investment power, except as set forth in the
footnotes below. Inclusion of shares shall not constitute an admission of
beneficial ownership.
(2) The above amount includes 10,105 shares obtainable through the conversion
of Preferred Stock held by Ms. Keon, 550 shares held directly by Ms. Keon and
54,763 shares held under the Margaret L. Keon Trust, established under Article
5 of the Mary G. Lumpkin Trust dated January 31, 1984, of which trust Ms. Keon
is trustee and beneficiary.
(3) The above amount includes 10,105 shares obtainable through the conversion
of Preferred Stock and 54,763 shares held under the Mary L. Sparks Trust,
established under Article 5 of the Mary G. Lumpkin Trust dated January 31,
1984, with respect to which shares Mrs. Sparks has no voting or investment
power. The shares held by this trust are also included in the number of
shares reported as beneficially owned by Mr. Richard A. Lumpkin in this table.
The above amount also includes 571 shares held directly by Mrs. Sparks and
26,248 shares held in trust for the benefit of Richard Anthony Lumpkin's adult
children for which Mrs. Sparks serves as trustee and of which shares Mrs.
Sparks disclaims beneficial ownership.
(4) The above amount includes 40,420 shares obtainable through the conversion
of Preferred Stock held by Mr. Adams. Also includes 3,022 shares held by a
corporation and over which Mr. Adams has shared voting and investment power
and 987 shares held by Mr. Adams' spouse, over which shares Mr. Adams has no
voting or investment power.
(5) The above amount includes 7,074 shares obtainable through the conversion
of Preferred Stock held by Mr. Diepholz.
(6) The above amount includes 20,210 shares obtainable through the conversion
of Preferred Stock held by Mr. Lumpkin and by the Richard A. Lumpkin Trust, of
which Mr. Lumpkin is trustee, 20,899 shares held directly by Mr. Lumpkin and
4,706 shares held by The Lumpkin Foundation, of which Mr. Lumpkin serves as a
director. The above amount also includes 54,763 shares held under the Richard
A. Lumpkin Trust, and further includes 10,105 shares obtainable through the
conversion of Preferred Stock and 54,763 shares held under the Mary Lee Sparks
Trust, of which Mr. Lumpkin is trustee. Each such trust has been established
under Article 5 of the Mary G. Lumpkin Trust dated January 31, 1984. The
above amount also includes 21,919 shares held by Consolidated Communications
Inc., of which Mr. Lumpkin is Chairman of the Board, director and Chief
Executive Officer and of which shares beneficial ownership is disclaimed. The
above amount does not include 30,951 shares held by the adult children of Mr.
Lumpkin and 26,248 shares held in trust for the benefit of Mr. Lumpkin*s adult
children of which trust Mr. Lumpkin is not a trustee and of which shares
beneficial ownership is also disclaimed.
(7) The above amount includes 2,425 shares obtainable through the conversion
of Preferred Stock held by Mr. Marvin. The above amount also includes 1,495
shares held by Mr. Marvin's spouse, over which shares Mr. Marvin has no voting
or investment power and of which Mr. Marvin disclaims beneficial ownership.
(8) The above amount includes 20,210 shares obtainable through the conversion
of Preferred Stock held by Mr. Melvin.
(9) The above amount includes 2,021 shares obtainable through the conversion
of Preferred Stock held by Mr. Roley. The above amount also includes 2,021
shares obtainable through the conversion of Preferred Stock and 5,559 shares
held in a trust for which Mr. Roley's spouse serves as trustee and over which
shares Mr. Roley has no voting or investment power.
(10) The above amount includes 2,425 shares obtainable through the conversion
of Preferred Stock held by Mr. Rowland.
(11) The above amount includes 1,496 shares held by Mr. Sparks' children and
over which Mr. Sparks' shares voting and investment power.
(12) The above amount includes 1,213 shares obtainable through the conversion
of Preferred Stock held by Mr. Cunningham.
(13) The above amount includes 1,011 shares obtainable through the conversion
of Preferred Stock held by Mr. Gilliland.
(14) Includes an aggregate of 104,509 shares obtainable through the conversion
of Preferred Stock.
As of March 11, 1996, the Bank acted as sole or co-fiduciary with respect
to trusts and other fiduciary accounts which own or hold 48,418 shares or
5.39% of the outstanding Common Stock of the Company over which the Bank has
sole or shared voting power and/or sole or shared investment power. Of such
shares, the Bank has sole voting and investment power with respect to 42,368
shares, or 4.72%, of the outstanding Common Stock, and has shared voting and
investment power with respect to 6,050 shares, or 0.67%, of the outstanding
Common Stock.
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires that the Company*s directors, executive officers and persons who own
more than 10% of the Company*s Common Stock file reports of ownership and
changes in ownership with the Securities and Exchange Commission. Such
persons are also required to furnish the Company with copies of all Section
16(a) forms they file. Based solely on the Company*s review of the copies of
such forms, the Company is not aware that any of its directors and executive
officers or 10% stockholders failed to comply with the filing requirements of
Section 16(a) during the period commencing January 1, 1995 through December
31, 1995.
PROPOSAL TO ADOPT THE DEFERRED COMPENSATION PLAN
The Board of Directors has adopted, subject to stockholder approval, the
First Mid-Illinois Bancshares, Inc. Deferred Compensation Plan (the "Plan"),
to permit directors, advisory directors and key officers of the Company and
its Subsidiaries to elect to defer a portion of the fees and cash compensation
payable by the Company and its Subsidiaries on account of service as a
director or employee. The Plan is intended as a means of maximizing the
effectiveness and flexibility of the compensation arrangements to directors
and a select group of management and highly compensated employees of the
Company and its Subsidiaries, and as an aid in attracting and retaining
individuals of outstanding abilities and specialized skills, thereby advancing
the interests of the Company and its stockholders.
The Company has maintained a deferred compensation plan for its directors
since June 1984. Under the former deferred compensation plan, as amended from
time to time, amounts deferred by directors were invested into a master
certificate of deposit account at the Bank. In November 1995, the Board of
Directors approved the Plan, which is an amended version of the former
deferred compensation plan. The Plan, as adopted in November 1995, expands
the categories of individuals eligible to defer compensation to include
advisory directors and key officers, and provides that amounts deferred under
the Plan will generally be invested into shares of the Company's Common Stock,
as more fully described below. The Plan is intended to replace the former
deferred compensation plan, and is subject to the approval of the Company's
stockholders.
The Plan is administered by the Deferred Compensation Plan Committee (the
"Deferred Compensation Committee"). The Plan provides that all directors and
advisory directors of the Company and its Subsidiaries are eligible to
participate in the Plan, and provides that the Deferred Compensation
Committee, in its sole discretion, may select additional eligible employees of
the Company and its Subsidiaries to participate in the Plan. The Plan
authorizes directors and advisory directors to defer the receipt of all of
their director fees and provides that such amounts may be invested into either
shares of Common Stock or into a master certificate of deposit account held at
the Bank. Key employees selected to participate in the Plan may defer the
receipt of up to 15% of their base salary and up to 100% of their incentive
compensation, subject to certain restrictions. Base salary and incentive
compensation deferred by key employees will be invested into Common Stock.
The Plan authorizes participants to purchase, in the aggregate, up to
100,000 shares of Common Stock, which shares may be purchased for use under
the Plan in the open market or may be issued directly by the Company. In the
event that the number of outstanding shares of Common Stock are changed into
or exchanged for a different number or kind of shares of capital stock or
other securities by reason of a reorganization, merger, consolidation,
recapitalization, stock dividend, split-up or stock right distribution or
other similar modification, the Plan provides that the Board of Directors
shall make an equitable adjustment in the number and kind of shares covered by
the Plan. The price at which shares will be deemed purchased under the Plan
shall be the actual purchase price for shares purchased in the open market and
shall be determined by the Board of Directors in accordance with the Company's
Dividend Reinvestment Plan with respect to shares issued directly by the
Company. The Company will not receive any of the amounts used to purchase
shares on the open market, but will receive the full purchase price of shares
issued directly by the Company under the Plan. In lieu of actual purchases,
the Plan also permits amounts deferred under the Plan and not directed into
the certificate of deposit account to be deemed to be invested in shares of
Common Stock without actual purchases of such shares being effectuated. In
the case of deemed investments in Common Stock, amounts deferred will accrue
appreciation in amounts equivalent to the appreciation which would have
accrued had actual purchases been made under the Plan, and will be credited to
each participant's account on a quarterly basis.
Subject to certain hardship provisions, no shares of Common Stock or
other amounts in a participant's account may be distributed until the March
15th following the date such participant terminates service with the Company
and its Subsidiaries. At the discretion of the Board of Directors, amounts to
be distributed under the Plan will be paid in one lump sum or in five annual
payments. Shares of Common Stock purchased under the Plan will only be
distributed to a participant upon delivery to the Company of such
representations and warranties as the Company deems necessary or advisable
with respect to the investment intent of the participant as required by the
Securities Act of 1933, as amended, and any other federal or state securities
laws or regulations. The Company is not required to deliver shares purchased
under the Plan prior to: (a) such shares becoming listed for trading on any
stock exchange on which the Common Stock may then be listed, if any; and (b)
the completion of such registration or other qualification of such shares
under any state or federal law, rule or regulation, as the Deferred
Compensation Committee shall determine to be necessary or advisable. The
Company presently intends to maintain an effective registration statement with
respect to the sale of shares to Plan participants, but is not required to
maintain such registration under the provisions of the Plan.
The Plan is intended to comply with Rule 16b-3 ("Rule 16b-3") under the
Exchange Act so that purchases of shares under the Plan will be exempt from
the short-swing profit prohibitions set forth in Section 16(b) of the Exchange
Act. Subject to certain limitations, including those currently applicable
pursuant to Rule 16b-3, the Company's Board of Directors may amend the Plan
from time to time. Under Rule 16b-3, as presently in effect, stockholder
approval is required for any amendment to the Plan which would increase
materially the number of shares issuable under the Plan, increase materially
the benefits which may be provided under the Plan or modify materially the
eligibility requirements for participation in the Plan. In addition, no
amendment may impair the existing rights of any individual under the Plan,
unless the individual consents to such amendment.
The Plan is also intended to be administered as a nonqualified deferred
compensation plan for a select group of management or highly compensated
employees. Assuming that the Plan is administered in such manner, amounts
deferred and earnings accrued under the Plan are not recognized in the
respective participant's federal taxable income until such contributions or
earnings are actually distributed or withdrawn from the Plan. The Company
will not be entitled to a compensation expense deduction for amounts deferred
under the Plan and will be required to pay income tax on all earnings on
amounts held in the Plan which accrue under the Plan while such amounts remain
in the Plan. Upon distribution or withdrawal of any such amounts, the
respective participant will be subject to income tax on such amounts and the
Company will receive a compensation expense deduction in the amount of the
withdrawal or distribution.
The information regarding federal tax laws contained in the foregoing is
only a brief summary of the applicable federal income tax laws and should not
be relied upon as being a complete statement. Further, income tax laws may
change after the date of this proxy statement.
The Board of Directors unanimously recommends that the stockholders vote
FOR the proposal to amend the Deferred Compensation Plan.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Stockholders will be asked to approve the appointment of KPMG Peat
Marwick LLP as the Company*s independent public accountants for the year
ending December 31, 1996. A proposal will be presented at the annual meeting
to ratify the appointment of KPMG Peat Marwick. If the appointment of KPMG
Peat Marwick is not ratified, the matter of the appointment of independent
public accountants will be considered by the Board of Directors.
Representatives of KPMG Peat Marwick LLP are expected to be present at the
meeting and will be given the opportunity to make a statement if they desire
to do so and will be available to respond to appropriate questions.
The Board of Directors unanimously recommends a vote FOR ratification of
this appointment.
STOCKHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
For inclusion in the Company's Proxy Statement and form of proxy relating
to the 1996 Annual Meeting of Stockholders, stockholder proposals must be
received by the Company on or before December 12, 1996 and must otherwise
comply with the Company's bylaws.
GENERAL
Your proxy is solicited by the Board of Directors and the cost of
solicitation will be paid by the Company. In addition to the solicitation of
proxies by use of the mails, officers, directors and regular employees of the
Company or the Subsidiaries, acting on the Company*s behalf, may solicit
proxies by telephone, telegraph or personal interview. The Company will, at
its expense, upon the receipt of a request from brokers and other custodians,
nominees and fiduciaries, forward proxy soliciting material to the beneficial
owners of shares held of record by such persons.
OTHER BUSINESS
It is not anticipated that any action will be asked of the stockholders
other than that set forth above, but if other matters properly are brought
before the meeting, the persons named in the proxy will vote in accordance
with their best judgment.
FAILURE TO INDICATE CHOICE
If any stockholder fails to indicate a choice in items (1) (2) or (3) on
the proxy card, the shares of such stockholder shall be voted (FOR) in each
instance.
REPORT ON FORM 10-K
THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH PERSON REPRESENTING THAT
HE OR SHE WAS A BENEFICIAL OWNER OF THE COMPANY*S COMMON STOCK AS OF THE
RECORD DATE FOR THE MEETING, UPON WRITTEN REQUEST, A COPY OF THE COMPANY*S
ANNUAL REPORT ON FORM 10-K. SUCH WRITTEN REQUEST SHOULD BE SENT TO MR.
WILLIAM S. ROWLAND, FIRST MID-ILLINOIS BANCSHARES, INC., 1515 CHARLESTON
AVENUE, P.O. BOX 499, MATTOON, ILLINOIS 61938.
By order of the Board of Directors
Daniel E. Marvin, Jr.
Chairman
Mattoon, Illinois
April 12, 1996
ALL STOCKHOLDERS ARE URGED TO SIGN AND MAIL THEIR PROXIES PROMPTLY
[side 1 of proxy card]
PROXY FIRST MID-ILLINOIS BANCSHARES, INC. PROXY
Proxy is Solicited By the Board of Directors
For the Annual Meeting of Stockholders -- May 15, 1996
The undersigned hereby appoints Ronald Batterham, Dan R. Cunningham and
Stanley E. Gilliland, or any of them acting in the absence of the others, with
power of substitution, attorneys and proxies, for and in the name and place of
the undersigned, to vote the number of shares of Common Stock that the
undersigned would be entitled to vote if then personally present at the Annual
Meeting of the Stockholders of First Mid-Illinois Bancshares, Inc., to be held
at the Ramada Inn, 300 Broadway Avenue, East in Rooms A B and C, Mattoon,
Illinois 61938, on Wednesday, May 15, 1996, at 11:00 a.m., local time, or any
adjournments or postponements thereof, upon the matters set forth in the
Notice of Annual Meeting and Proxy Statement (receipt of which is hereby
acknowledged) as designated on the reverse side, and in their discretion, the
proxies are authorized to vote upon such other business as may come before the
meeting:
(square) Check here for address change.
New Address:
(square) Check here if you plan to attend the meeting.
(Continued and to be signed on reverse side.)
[side 2 of proxy card]
FIRST MID-ILLINOIS BANCSHARES, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY
1. Election of Directors
Kenneth R. Diepholz and Gary W. Melvin
2. To approve the adoption of the First Mid-Illinois Bancshares, Inc.
Deferred Compensation Plan
3. To ratify the selection of KPMG Peat Marwick LLP as auditors for the
Company for 1996.
The Board of Directors recommends a vote FOR all proposals.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH SPECIFICATION MADE. IF NO CHOICES
ARE INDICATED, THIS PROXY WILL BE VOTED FOR ALL PROPOSALS.
Dated: , 1996
Signature(s)
NOTE: Please sign exactly as your name(s) appears. For joint accounts, each
owner should sign. When signing as executor, administrator, attorney, trustee
or guardian, etc., please give your full title.