<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
JUNE 30, 1995
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the quarterly period ended June 30, 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(b) of the Act: 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 the number of shares outstanding of each of the Registrant's classes
of common stock, as of the latest practicable date: 889,108 shares of Common
Stock at July 19, 1995.
1<PAGE>
FORM 10-Q
For the Quarter Ended
June 30, 1995
INDEX
Beginning
Page No.
Part I - Financial Information
Item 1. Financial Statements 3
Consolidated Balance Sheets 4
Consolidated Statements of Income 5
Consolidated Statement of Cash Flows 7
Notes to Consolidated Financial Statements 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
Part II - Other Information
Item 1. Legal Proceedings 28
Item 2. Changes in Securities 28
Item 3. Defaults Upon Senior Securities 28
Item 4. Submission of Matters to a Vote
of Security Holders 28
Item 5. Other Information 28
Item 6. Exhibits and Reports on Form 8-K 28
Signatures 29
2<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not include
all of the information required by generally accepted accounting principles
for complete financial statements and related footnote disclosures. In the
opinion of management, all adjustments (consisting only of normal recurring
accruals) considered for a fair presentation have been included. For further
information, refer to the financial statements and notes included in the
Registrant's 1994 Annual Report to Stockholders.
3<PAGE>
FIRST MID-ILLINOIS BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited) (in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
<S> <C> <C>
Assets
Cash and due from banks:
Noninterest bearing $ 15,563 $ 17,631
Interest bearing 660 82
Excess funds sold 4,425 -
Cash and cash equivalents 20,648 17,713
Investment certificates of deposits 99 99
Investment securities available-for-sale at fair value 64,321 68,973
Investment securities held-to-maturity
(approximate fair value of $63,486,000 at
June 30, 1995 and $59,836,000 at December 31, 1994) 64,021 62,304
Loans 295,805 282,153
Less allowance for loan losses 2,696 2,608
Net loans 293,109 279,545
Premises and equipment, net 9,337 9,336
Intangible assets 6,323 6,627
Other assets 6,848 6,561
Total assets $ 464,706 $ 451,158
======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest bearing $ 44,978 $ 45,159
Interest bearing 344,292 344,409
Total deposits 389,270 389,568
Long-term debt 7,700 7,700
Short-term borrowings 29,480 19,590
Other liabilities 4,506 3,700
Total liabilities 430,956 420,558
Stockholders' equity
Preferred stock no par value; authorized 1,000,000
shares; issued 620 shares of Series A preferred
with stated value of $5,000 per share 3,100 3,100
Common stock, $4 par value; authorized 2,000,000
shares; issued 891,108 shares in 1995
and 878,769 in 1994 3,580 3,515
Additional paid-in-capital 3,841 3,531
Retained earnings 23,118 21,577
Net unrealized gain (loss) on available-for-sale
investment securities, net of tax 135 (1,099)
33,774 30,624
Less treasury stock at cost, 2,000 shares 24 24
Total stockholders' equity 33,750 30,600
Total liabilities and stockholders' equity $ 464,706 $ 451,158
======================
</TABLE>
See accompanying notes to consolidated financial statements.
4<PAGE>
FIRST MID-ILLINOIS BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
Three months ended June 30, 1995 and 1994
(unaudited) (in thousands, except per share data)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Interest income:
Interest and fees on loans $ 6,181 $ 4,499
Interest on investment securities 1,971 1,613
Interest on excess funds sold 77 9
Interest on deposits with financial institutions 47 25
Total interest income 8,276 6,146
Interest expense:
Interest on deposits 3,668 2,534
Interest on short-term borrowings 110 86
Interest on long-term debt 320 86
Total interest expense 4,098 2,706
Net interest income 4,178 3,440
Provision for loan losses 48 72
Net interest income after provision for loan losses 4,130 3,368
Other income:
Trust fees 305 298
Brokerage and annuity fees 42 127
Service charges 385 357
Securities gains, net - -
Mortgage banking income 71 27
Other 181 197
Total other income 984 1,006
Other expense:
Salaries and employee benefits 1,878 1,718
Occupancy, furniture and equipment expense, net 569 491
Federal deposit insurance premiums 221 195
Other 1,043 831
Total other expense 3,711 3,235
Income before income taxes 1,403 1,139
Income taxes 453 329
Net income $ 950 $ 810
=======================
Per common share data:
Primary earnings per share $ .99 $ .84
Fully diluted earnings per share .94 .81
</TABLE>
See accompanying notes to consolidated financial statements.
5<PAGE>
FIRST MID-ILLINOIS BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
Six months ended June 30, 1995 and 1994
(unaudited) (in thousands, except per share data)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Interest income:
Interest and fees on loans $ 12,004 $ 8,787
Interest on investment securities 3,906 3,229
Interest on excess funds sold 137 41
Interest on deposits with financial institutions 67 60
Total interest income 16,114 12,117
Interest expense:
Interest on deposits 7,148 5,078
Interest on short-term borrowings 289 164
Interest on long-term debt 460 150
Total interest expense 7,897 5,392
Net interest income 8,217 6,725
Provision for loan losses 90 144
Net interest income after provision for loan losses 8,127 6,581
Other income:
Trust fees 608 638
Brokerage and annuity fees 90 217
Service charges 749 685
Securities gains, net - 21
Mortgage banking income 98 99
Other 422 368
Total other income 1,967 2,028
Other expense:
Salaries and employee benefits 3,726 3,414
Occupancy, furniture and equipment expense, net 1,118 940
Federal deposit insurance premiums 442 392
Other 2,037 1,585
Total other expense 7,323 6,331
Income before income taxes 2,771 2,278
Income taxes 858 654
Net income $ 1,913 $ 1,624
======================
Per common share data:
Primary earnings per share $ 2.00 $ 1.77
Fully diluted earnings per share 1.90 1.62
</TABLE>
See accompanying notes to consolidated financial statements.
6<PAGE>
FIRST MID-ILLINOIS BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended June 30, 1995 and 1994
(unaudited) (In thousands)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $ 950 $ 810
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 48 72
Depreciation, amortization and accretion, net 341 361
Securities (gains), net - -
Gain on sale of loans held for sale (8) (4)
Origination of mortgage loans held for sale (485) (357)
Proceeds from sales of mortgage loans held for sale 847 575
Net (increase) in other assets (1,115) (619)
Net increase in other liabilities 916 1,448
Net cash provided by operating activities 1,494 2,286
Cash flows from investing activities:
Expenditures for premises and equipment (232) (88)
Net (increase) in loans (12,812) (14,569)
Proceeds from sales of:
Securities available-for-sale - 2,039
Proceeds from maturities of:
Investment securities - 7,179
Securities available-for-sale 7,733 -
Securities held-to-maturity 469 -
Purchases of:
Securities available-for-sale (217) (783)
Securities held-to-maturity (3,004) (1,388)
Net decrease in investment certificates of deposits - 2,185
Net cash (used in) investing activities (8,063) (5,425)
Cash flows from financing activities:
Net (decrease) in deposits (7,550) (2,549)
Net increase in short-term borrowings 8,380 8,140
Repayment of long-term debt - (300)
Dividends paid on common stock (176) (298)
Dividends paid on preferred stock (143) (143)
Net cash provided by financing activities 511 4,850
Increase (decrease) in cash and cash equivalents (6,058) 1,711
Cash and cash equivalents at beginning of period 26,706 12,870
Cash and cash equivalents at end of period $ 20,648 $ 14,581
======================
Additional disclosure of cash flow information:
Interest paid during the period $ 4,111 $ 2,573
Income taxes paid during the period 850 725
Loans transferred to real estate owned 36 156
======================
</TABLE>
See accompanying notes to consolidated financial statements.
7<PAGE>
FIRST MID-ILLINOIS BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended June 30, 1995 and 1994
(unaudited) (In thousands)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,913 $ 1,624
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 90 144
Depreciation, amortization and accretion, net 674 795
Securities (gains), net - (21)
Gain on sale of loans held for sale (17) (47)
Origination of mortgage loans held for sale (1,025) (2,195)
Proceeds from sales of mortgage loans held for sale 1,396 2,900
Net (increase) decrease in other assets (287) 457
Net increase in other liabilities 702 860
Net cash provided by operating activities 3,446 4,517
Cash flows from investing activities:
Expenditures for premises and equipment (371) (167)
Net (increase) in loans (14,008) (14,218)
Proceeds from sales of:
Securities available-for-sale - 8,535
Proceeds from maturities of:
Investment securities - 21,618
Securities available-for-sale 10,202 -
Securities held-to-maturity 1,287 -
Purchases of:
Securities available-for-sale (3,679) (11,794)
Securities held-to-maturity (3,004) (12,776)
Net decrease in investment certificates of deposits - 2,177
Net cash (used in) investing activities (9,573) (6,625)
Cash flows from financing activities:
Net (decrease) in deposits (298) (9,607)
Net increase in short-term borrowings 9,890 5,980
Repayment of long-term debt - (300)
Dividends paid on common stock (387) (658)
Dividends paid on preferred stock (143) (143)
Net cash provided by (used in) financing activities 9,062 (4,728)
Increase (decrease) in cash and cash equivalents 2,935 (6,836)
Cash and cash equivalents at beginning of period 17,713 21,417
Cash and cash equivalents at end of period $ 20,648 $ 14,581
======================
Additional disclosure of cash flow information:
Interest paid during the period $ 8,283 $ 5,371
Income taxes paid during the period 850 850
Loans transferred to real estate owned 109 156
======================
</TABLE>
See accompanying notes to consolidated financial statements.
8<PAGE>
Notes to the Consolidated Financial Statements
1) The consolidated financial statements include the accounts of First
Mid-Illinois Bancshares, Inc. (the "Registrant"), and its wholly owned
subsidiaries, First Mid-Illinois Bank & Trust, N.A. (the "Bank"),
Heartland Savings Bank ("Heartland") and Mid-Illinois Data Services, Inc.
("MIDS"). Intercompany amounts have been eliminated.
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 $8,570,000 with
$5,570,000 of that amount being internally generated funds and $3,000,000
resulting from additional long-term borrowings of the Registrant. 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 the DBI operations have been combined with those of
the Registrant since October 4, 1994.
2) The financial information reflects all adjustments which, in the opinion
of management, are necessary to present a fair statement of the results
of the interim periods ended June 30, 1995 and 1994, and all such
adjustments are of a normal recurring nature. The results of the interim
period ended June 30, 1995, are not necessarily indicative of the results
expected for the year ending December 31, 1995.
3) Income for primary and fully diluted earnings per share is adjusted for
dividends attributable to preferred stock. Primary earnings per 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 for the
periods ended June 30, 1995 and 1994, are as follows:
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Primary 885,620 876,769 883,629 876,769
Fully Diluted 1,010,922 1,002,071 1,008,931 1,002,071
</TABLE>
4) The Registrant is required to classify its debt securities into one of
three categories at the time of purchase: held-to-maturity, available-
for-sale or trading. Held-to-maturity securities are those which
management has the intent and ability to hold to maturity. These
securities are carried at amortized historical cost. Available-for-sale
securities are those securities which management may sell prior to
maturity as a result of the Registrant's overall asset and liability
management strategy. These securities are recorded at fair value.
Trading securities are those securities bought and held principally for
the purpose of selling them in the near term. Trading securities are
recorded at the lower of historical cost or fair value. The Registrant
currently has no securities designated as trading.
9<PAGE>
5) Heartland originates residential first mortgage loans both for its
portfolio and for sale into the secondary market. Held for sale loans
are carried at the lower of aggregate, amortized cost or estimated market
value. Mortgage banking income consists of gains or losses on the sale
of loans and servicing fee income. Origination costs for loans sold are
expensed as incurred.
10<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations-Summary
For the second quarter, net income amounted to $950,000 ($.94 per share on
a fully diluted basis) in 1995 as compared with $810,000 ($.81 per share on a
fully diluted basis) in 1994. A summary of the factors which contributed to
the quarterly earnings increase follows (dollars in thousands except per
share data):
<TABLE>
<CAPTION>
Three months ended June 30, 1995 vs. June 30, 1994 Total Per Share
- -----------------------------------------------------------------------------
<S> <C> <C>
Net interest income $ 738 $ .72
Provision for loan losses 24 .02
Other income (22) (.02)
Other expenses (476) (.47)
Income taxes (124) (.12)
- -----------------------------------------------------------------------------
Total increase in net income $ 140 $ .13
=============================================================================
</TABLE>
Net income for the six month period ended June 30, 1995, amounted to
$1,913,000 ($1.90 per share on a fully diluted basis). This represents a
$289,000 or 17.8% increase from the earnings of $1,624,000 ($1.62 per share
on a fully diluted basis) earnings for the six month period ended June 30,
1994. A summary of the factors which contributed to the earnings increase
follows (dollars in thousands, except per share data):
<TABLE>
<CAPTION>
Six months ended June 30, 1995 vs. June 30, 1994 Total Per Share
- -----------------------------------------------------------------------------
<S> <C> <C>
Net interest income $1,492 $ 1.47
Provision for loan losses 54 .05
Other income (61) (.06)
Other expenses (992) (.98)
Income taxes (204) (.20)
- -----------------------------------------------------------------------------
Total increase in net income $ 289 $ .28
=============================================================================
</TABLE>
Net Interest Income and Interest Rate Sensitivity
During the first six months in 1995, the Registrant's net interest income
increased by $1,492,000 (22.2%) as compared with the net interest income for
the same period in 1994. Net interest income for the six months ended June
30, 1995, was $8,127,000 as compared with $6,725,000 for the six months ended
June 30, 1994. The table which follows sets forth details of average
balances, interest income and expense and average rates for the Registrant
for 1995 and 1994. The 1995 figures have been annualized based on the actual
results through June 30, 1995. The annualized amounts are not necessarily
indicative of the actual amounts that are expected or that will occur for the
year ended December 31, 1995.
As can be seen, annualized net interest margin is 3.99% in 1995 (on a tax
equivalent basis). The overall cost of interest bearing liabilities has been
68 basis points higher in 1995 than in 1994 and the yield on interest earning
assets has been 66 basis points higher in 1995 than in 1994.
11<PAGE>
Beginning in early 1994, economic activity and loan demand began to
increase significantly in the Registrant's market area. As the largest
financial institution in the area and the one with the most banking outlets,
the Registrant's loan totals have increased dramatically. The loan:deposit
ratio (a traditional measure of a banks relative lending volume) of the
Registrant has increased from 63.9% at December 31, 1993 to 76.0% at June 30,
1995. This rapid growth in loans has caused net interest income to increase
because yields on loans are generally 200 - 300 basis points higher than are
the yields on the investment products they replace and/or the incremental
funding costs of the additional deposits or short term borrowings that the
Registrant has acquired to fund the loan growth.
As a result of an active asset/liability management effort, this loan
growth has not added appreciably to the amount of interest rate or liquidity
risk associated with the Registrant's operations.
12<PAGE>
Distribution of Consolidated Assets, Liabilities, and Stockholders' Equity
Interest Rates and Interest Differential (dollars in thousands)
<TABLE>
<CAPTION>
Six Month Period Ended Year Ended
June 30, 1995 December 31, 1994
Avg Bal Int Avg Rate Avg Bal Int Avg Rate
<S> <C> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS
Investment certificates
of deposits $ 99 $ 10 10.26% $ 1,211 $ 51 4.21%
Due from banks-interest
bearing 2,128 124 5.83% 924 22 2.38%
Excess funds sold 4,719 274 5.80% 3,643 156 4.28%
Investment securities:
Taxable 117,960 7,045 5.97% 117,285 5,772 4.92%
Tax-exempt 12,973 768 8.97% 14,546 851 8.86%
Loans (net of
unearned income) 284,442 24,007 8.44% 243,166 19,576 8.05%
Total earning assets 422,321 32,228 7.72% 380,775 26,428 7.06%
NONEARNING ASSETS
Cash and due from banks 15,014 13,720
Premises and equipment 9,305 8,393
Other nonearning assets 12,512 9,150
Allowance for loan losses (2,654) (2,354)
Total assets $456,498 $409,684
========= =========
INTEREST BEARING LIABILITIES
Demand deposits $108,620 $ 2,880 2.65% $110,069 $ 2,764 2.51%
Savings deposits 42,733 1,152 2.70% 38,985 1,009 2.59%
Time deposits 196,972 10,264 5.21% 170,252 7,298 4.29%
Short-term borrowings 18,880 920 4.87% 13,103 471 3.59%
Long-term debt 7,700 578 7.51% 5,579 376 6.74%
Total interest-
bearing liabilities 374,905 15,794 4.21% 337,988 11,918 3.53%
NONINTEREST-BEARING LIABILITIES
Demand deposits 45,180 37,527
Other liabilities 4,295 3,901
Stockholders' equity 32,118 30,268
Total liabilities
& equity $456,498 $409,684
========= =========
Net interest earnings $16,434 $14,510
======== ========
Net interest earnings as a
% of interest earning assets
on a full tax equivalent basis 3.99% 3.93%
===== =====
</TABLE>
(1) Full tax equivalent yields on tax exempt securities have been calculated
using a 34% tax rate.
(2) Nonaccrual loans have been included in the average balances.
(3) Interest includes net loan fees.
(4) 1995 interest income and expense amounts have been annualized based on
results through June 30, 1995. The annualized amounts are not
necessarily indicative of the actual amounts that are expected or that
will occur for the year ending December 31, 1995.
13<PAGE>
The following table describes changes in net interest income attributable to
changes in the volume of earning assets compared to changes in interest rates
(in thousands).
1995 Compared to 1994
Increase - (Decrease)
<TABLE>
<CAPTION>
Total Rate/
Change Volume Rate Volume
<S> <C> <C> <C> <C>
INTEREST INCOME:
Investment certificates
of deposit $ (41) $ (47) $ 73 $ (67)
Due from banks-interest bearing 102 29 32 41
Excess funds sold 118 46 55 17
Investment securities:
Taxable 1,273 33 1,233 7
Tax-exempt (83) (92) 10 (1)
Loans 4,431 3,323 948 160
Total interest income 5,800 3,292 2,351 157
INTEREST EXPENSE:
Demand deposits 116 (36) 154 (2)
Savings deposits 143 97 42 4
Time deposits 2,966 1,145 1,574 247
Short-term borrowings 449 208 167 74
Long-term debt 202 143 43 16
Total interest expense 3,876 1,557 1,980 339
NET INTEREST EARNINGS $ 1,924 $ 1,735 $ 371 $ (182)
=======================================
</TABLE>
(1) Nonaccrual 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.
(2) Changes in rates and volume are computed on a consistent basis using the
absolute values of changes in volume compared to the absolute values of
the changes in rates. 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.
(3) There were no foreign activities by the Registrant during the six month
periods ending June 30, 1995 and June 30, 1994.
(4) 1995 interest income and expense amounts have been annualized based on
results through June 30, 1995. The annualized amounts are not
necessarily indicative of the actual amounts that are expected or that
will occur for the year ending December 31, 1995.
14<PAGE>
The following table is the Registrant's "static gap" schedule as of June
30, 1995. This is just one of several tools used by management to monitor
the interest rate sensitivity position of the Registrant. Earning assets and
interest bearing liabilities are presented below within selected time
intervals based on their repricing and maturing characteristics. Interest
rate sensitivity is measured by "gaps", (the difference between interest
earning assets and interest bearing liabilities within a particular time
interval). A positive GAP indicates more assets than liabilities could
reprice in that time period and a negative GAP indicates more liabilities
could reprice.
(dollars in thousands) Number of Months Until Next Repricing Opportunity
<TABLE>
<CAPTION>
0-1 1-3 3-6 6-12 12+
<S> <C> <C> <C> <C> <C>
Interest Earning Assets:
Investment certificates
of deposits $ - $ - $ - $ - $ 99
Due from banks-
interest bearing 660 - - - -
Excess funds sold 4,425 - - - -
Taxable investment
securities 42,973 14,144 13,516 12,691 32,291
Non-taxable investment
securities 265 10 373 369 11,710
Loans 34,264 13,937 29,018 38,334 180,252
Total $ 82,587 $ 28,091 $ 42,907 $ 51,394 $ 224,352
Interest Bearing Liabilities:
Savings and NOW accts $ 108,638 $ - $ - $ - $ -
Money market accounts 37,266 - - - -
Other time deposits 31,951 35,515 33,201 36,215 61,506
Short-term borrowings 19,980 - - 6,000 3,500
Long-term debt 7,700 - - - -
Total $ 205,535 $ 35,515 $ 33,201 $ 42,215 $ 65,006
Periodic GAP $(122,948) $ (7,424) $ 9,706 $ 9,179 $ 159,346
Cumulative GAP $(122,948) $(130,372) $(120,666) $ (111,487)$ 47,859
Gaps as a percent of
interest earning assets:
Periodic (28.6%) (1.7%) 2.3% 2.1% 37.1%
Cumulative (28.6%) (30.3%) (28.0%) (25.9%) 11.2%
======================================================
</TABLE>
The above tabulation classifies savings and NOW accounts as immediately
repriceable because if rates paid on these accounts were to change, the rates
would, most likely, change on all such accounts at the same time. As a
practical matter, management is able to exercise a significant amount of
control over these rates and they have shown to be very resistant to rate
changes.
Management of the Registrant continually monitors its interest rate
sensitivity position. While the preceding table is an indication of interest
rate risk, overall interest rate sensitivity is influenced by other factors
such as the competitive environment, the timing and amount of rate changes,
loan prepayments and the inherent stability of certain deposits. A number of
different factors, including those objectively determined and measurable, as
well as those subjectively ascertained, are considered by management in its
evaluation of interest rate risk. As a result of this analysis, management
15<PAGE>
believes that the overall level of interest rate risk is manageable and does
not believe that changing rates will have a material negative effect on the
Registrant's net interest margin.
Investment Portfolio and Investment Transactions
The Registrant adopted Statement of Financial Accounting Standards No. 115
(FAS 115), "Accounting for Certain Investments in Debt and Equity Securities"
effective December 31, 1993. Investment securities that the Registrant has
the positive intent and ability to hold to maturity are classified as "held-
to-maturity" and reported at amortized cost. All other investment securities
are classified as "available-for-sale" and have been reported at their
estimated fair value at June 30, 1995, and December 31, 1994. In accordance
with FAS 115, the unrealized gains, net of related taxes, in the amount of
$135,000 have been included in stockholders' equity at June 30, 1995.
Total investment securities designated as available-for-sale represented
50% of the portfolio and held-to-maturity represented 50%. During the three
months ended June 30, 1995, neither available-for-sale nor held-to-maturity
investment securities were sold. During the three months ended June 30,
1995, $3,000,000 held-to-maturity investment securities and $217,000
available-for-sale investment securities were purchased.
The table below provides detailed information for investment securities at
June 30, 1995, (in thousands):
<TABLE>
<CAPTION>
Gross Gross Approximate
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Available-for-sale:
U.S. Treasury securities and
obligations of U.S.
government corporations
and agencies $ 29,280 $ 296 $ 233 $ 29,343
Obligations of state and
political subdivisions 9,105 403 245 9,263
Mortgage backed securities 23,626 149 165 23,610
Other securities 2,105 - - 2,105
Total available-for-sale $ 64,116 $ 848 $ 643 $ 64,321
Held-to-maturity:
U.S. Treasury securities and
obligations of U.S.
government corporations
and agencies $ 44,855 $ 231 $ 710 $ 44,376
Obligations of state and
political subdivisions 4,007 57 24 4,040
Mortgage backed securities 15,159 61 151 15,069
Other securities - - - -
Total held-to-maturity $ 64,021 $ 349 $ 885 $ 63,485
Total $ 128,137 $ 1,197 $ 1,528 $ 127,806
==============================================
</TABLE>
16<PAGE>
Information related to investment securities at December 31, 1994 follows
(in thousands):
<TABLE>
<CAPTION>
Gross Gross Approximate
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
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
Other securities - - - -
Total held-to-maturity $ 62,304 $ 12 $ 2,480 $ 59,836
Total $ 132,942 $ 281 $ 4,414 $ 128,809
==============================================
</TABLE>
The following table indicates the expected maturities of investment
securities classified as available-for-sale and held-to-maturity at June 30,
1995, (dollars in thousands) and their weighted average yields:
Available-for-Sale Investment Securities - Approximate Fair Value Maturing
<TABLE>
<CAPTION>
One After 1 After 5 After
year through through ten
or less 5 years 10 years years Total
<S> <C> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S.
Government corporations
and agencies $ 9,963 $ 17,862 $ 1,519 $ - $ 29,344
Mortgage-backed securities 1,062 14,350 4,383 3,815 23,610
Obligations of states and
political subdivisions 442 6,589 2,231 - 9,262
Other securities - - - 2,105 2,105
Total Available-for-sale
Securities $ 11,467 $ 38,801 $ 8,133 $ 5,920 $ 64,321
================================================
Weighted Average Yield 4.79% 6.08% 7.25% 8.88%
Full Tax Equivalent Yield 4.92% 6.55% 8.18% 8.88%
================================================
</TABLE>
17<PAGE>
Held-to Maturity Investment Securities - Book Value Maturing
<TABLE>
<CAPTION>
One After 1 After 5 After
year through through ten
or less 5 years 10 years years Total
<S> <C> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S.
Government corporations
and agencies $ 4,801 $ 35,072 $ 4,982 $ - $ 44,855
Mortgage-backed securities 1,037 12,446 606 1,070 15,159
Obligations of states and
political subdivisions 362 2,312 1,333 - 4,007
Other securities - - - - -
Total Held-to-maturity
Securities $ 6,200 $ 49,830 $ 6,921 $ 1,070 $ 64,021
================================================
Weighted Average Yield 5.33% 5.09% 4.61% 6.41%
Full Tax Equivalent Yield 5.49% 5.21% 5.12% 6.41%
================================================
</TABLE>
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 quarterly repayment history. However, where
securities have call features and market values greater than par, the call
date has been used to determine the expected maturity.
Except for U.S. Treasury securities and obligations of U.S. Government
corporations and agencies, no investment in a single issuer exceeds 10% of
stockholders' equity at June 30, 1995.
Other securities includes stock in the Federal Home Loan Bank totaling
$1,699,000 in 1995 and $507,000 in 1994.
18<PAGE>
Loan Quality and Allowance for Loan Losses
The following tables provide information relating to the Registrant's loan
portfolio, risk elements within the portfolio and historical loan loss
experience.
The Registrant adopted Statement of Financial Accounting Standards No. 114
"Accounting by Creditors for Impairment of a Loan" ("FAS 114") and Statement
of Financial Accounting Standards No. 118 "Accounting by Creditors for
Impairment of a Loan-Income Recognition and Disclosure" ("FAS 118") effective
January 1, 1995. FAS 114 applies to all creditors and to all loans that are
accounted for at fair value or at the lower of cost or fair value. It
requires that impaired loans be measured at the present values of expected
future cash flows by discounting those cash flows at the loan's effective
interest rate. FAS 118 amends FAS 114 to allow a creditor to use existing
methods for recognizing interest income on an impaired loan. FAS 118 also
amends the disclosure requirements of FAS 114 to require information about
the recorded investment in certain impaired loans and about how a creditor
recognizes interest income related to those impaired loans. The Registrant
had no impaired loans as of June 30, 1995.
Loan Portfolio
The composition of the Registrant's loan portfolio as of June 30, 1995,
December 31, 1994 and 1993 is as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Commercial, financial
and agricultural $ 64,452 $ 61,520 $ 50,353
Real estate - mortgage 203,408 195,524 151,916
Installment loans to individuals 25,929 22,294 16,360
Other 2,016 2,815 4,590
Total Loans $295,805 $282,153 $223,219
====================================
</TABLE>
The following table presents the aggregate balances of loans outstanding as
of June 30, 1995, by maturities, based on remaining scheduled, contractual
repayments of principal (in thousands):
<TABLE>
<CAPTION>
Over 1
One Year Through Over
or Less 5 Years 5 Years Total
<S> <C> <C> <C> <C>
Commercial, financial
and agricultural $45,148 $15,170 $ 4,134 $ 64,452
Real estate - mortgage 40,696 99,733 62,979 203,408
Installment loans to individuals 5,771 19,156 1,002 25,929
Other 578 977 461 2,016
Total Loans $92,193 $135,036 $68,576 $295,805
==========================================
</TABLE>
As of June 30, 1995, loans with maturities over one year were comprised of
$162,466,000 in fixed rate loans and $41,146,000 in variable rate loans. The
loan maturities noted previously 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.
As of June 30, 1995, the Registrant had loan concentrations in agricultural
industries of 12.7% of outstanding loans. The Registrant had no other
19<PAGE>
industry loan concentrations in excess of 10% of outstanding loans.
There was no foreign activity required to be disclosed for the reporting
period ended June 30, 1995.
Non-Performing Loans
It is the Registrant's policy to discontinue the accrual of interest income
on any loan 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.
The following table presents information concerning the aggregate amount of
nonperforming loans at the dates indicated. 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) or (b) above which are "restructured loans" as defined
in Statement of Financial Accounting Standards No. 15, "Accounting by Debtors
and Creditors for Troubled Debt Restructurings."
Nonperforming Loans
(In thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Nonaccrual loans $283 $393 $497 $685 $348
Loans past due ninety days
or more and still accruing 400 509 248 585 418
Restructured loans which are
performing in accordance
with revised terms 664 772 307 383 678
========= ==============================
</TABLE>
Interest income that would have been reported in 1995 if nonaccrual and
restructured loans had been performing totaled $37,900 for the six month
period ended June 30, 1995. Interest income that was included in income
totaled $11,900 for the same period.
Allowance for Loan Losses
The provision for loan losses charged to expense was $90,000 for the six
months ended June 30, 1995, as compared to $144,000 for the six months ended
June 30, 1994, a $54,000 (37.5%) decrease. This decrease is due to reduced
loan charge offs, a lower level of problem loans and more favorable economic
conditions which allowed the Registrant to reduce the provision and at the
same time improve reserve coverage.
Management establishes an allowance for loan losses which reduces the total
loans outstanding by an estimate of uncollectible loans. Loans deemed to be
uncollectible are charged against and reduce the allowance. The provision
for loan losses and recoveries are credited to and increase the allowance.
The allowance for loan losses totaled $2,696,000 at June 30, 1995, which
represented .9% of total loans. The allowance for loan losses equaled 200.1%
and 155.8% of total non-performing loans at June 30, 1995 and December 31,
1994, respectively.
20<PAGE>
A summary of loan loss experience for the periods indicated is as follows
(dollars in thousands):
<TABLE>
<CAPTION>
Six
Months Ended Year Ended
June 30, December 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Average loans
outstanding, net
of unearned income $284,442 $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 15 29 140 298 273
Real estate-mortgage 9 28 241 350 11
Installment 16 120 86 139 132
Other - - - - -
Total charge-offs 40 177 467 787 416
Recoveries:
Commercial, financial
and agricultural 15 98 150 167 57
Real estate-mortgage - 21 3 18 -
Installment 23 45 26 49 33
Total recoveries 38 164 179 234 90
Net charge-offs
(recoveries) 2 13 288 553 326
Provision for loan losses 90 168 492 543 387
Allowance-end of period $ 2,696 $ 2,608 $ 2,110 $ 1,906 $ 1,566
=========== =======================================
Ratio of net charge-offs
(recoveries) to
average loans .00% .01% .13% .31% .25%
=========== =======================================
Ratio of allowance
for loan losses to
loans outstanding
(less unearned interest)
at end of period .91% .93% .95% .89% 1.17%
=========== =======================================
</TABLE>
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. In determining the adequacy of the
allowance for loan losses, management relies predominantly on a disciplined
credit review and approval process which extends to the full range of the
Registrant's credit exposure. The review process is directed by overall
lending policy and is intended to identify, at the earliest possible stage,
21<PAGE>
borrowers who might be facing financial difficulty. Once identified, the
magnitude of the exposure to individual borrowers is quantified in the form
of specific allocation 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 restructured loans and the
current and anticipated economic conditions in the region where the
Registrant operates. In addition to the aforementioned consideration,
management also considers the experience of other banks, thrifts and bank
holding companies.
The allowance for loan losses, in management's judgment, would be allocated
as follows to cover potential loan losses (in thousands):
<TABLE>
<CAPTION>
June 30, 1995 December 31, 1994
Allowance % of Allowance % of
for loans for loans
loan to total loan to total
losses loans losses loans
<S> <C> <C> <C> <C>
Commercial, financial,
and agricultural $ 1,433 21.8% $ 1,481 21.8%
Real estate-mortgage 336 68.7% 427 69.3%
Installment 124 8.8% 100 7.9%
Other - .7% - 1.0%
Total allocated 1,893 2,008
Unallocated 803 N/A 600 N/A
Allowance at end of
reported period $ 2,696 100% $ 2,608 100%
===================== ====================
</TABLE>
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.
There were no other interest-bearing assets which would be required to be
disclosed as having "risk elements" if such other assets were loans.
22<PAGE>
Deposit Base
The following table details the year-to-date average deposits for the
indicated periods and weighted average rates at June 30, 1995, December 31,
1994 and 1993 (in thousands):
<TABLE>
<CAPTION>
June 30, December 31, December 31,
1995 1994 1993
Weighted Weighted Weighted
Average Average Average
Amount Rate Amount Rate Amount Rate
<S> <C> <C> <C> <C> <C> <C>
Demand deposits:
Non-interest bearing $ 45,180 - $ 37,527 - $ 31,746 -
Interest bearing 108,620 2.65% 110,069 2.51% 107,896 2.68%
Savings 42,733 2.70% 38,985 2.59% 35,860 2.88%
Time deposits 196,972 5.21% 170,252 4.29% 168,724 4.39%
Total average deposits $393,505 3.63% $356,833 3.10% $344,226 3.29%
===================================================
</TABLE>
The following table sets forth the maturity of time certificates of deposit
of $100,000 or more at June 30, 1995 (in thousands):
<TABLE>
<CAPTION>
Balance
<S> <C>
3 months of less $ 16,665
Over 3 through 6 months 5,262
Over 6 through 12 months 4,415
Over 12 months 5,987
Total $ 32,329
===========
</TABLE>
There were no time deposits of $100,000 or more that were issued by foreign
offices at June 30, 1995.
Short-term Borrowings
Short-term borrowings at June 30, 1995, December 31, 1994 and December 31,
1993 are shown (in thousands) in the following table:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Securities sold under agreement
to repurchase $19,980 $15,590 $ 9,630
Federal Home Loan Bank advances 9,500 3,500 -
Federal funds purchased - 500 -
Total short-term borrowings $29,480 $19,590 $ 9,630
==============================
</TABLE>
Federal Home Loan Bank advances are secured by stock of the Federal Home
Loan Bank of Chicago and by residential mortgage loans.
23<PAGE>
Information concerning such borrowings for the periods ended June 30, 1995,
December 31, 1994 and December 31, 1993 is as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Maximum amount of borrowings
outstanding at any month end $29,480 $23,460 $11,390
Average amount outstanding 19,006 13,103 8,843
Weighted average interest
rate-end of period 4.19% 3.55% 2.91%
Weighted average interest
rate during the year 4.87% 3.59% 2.96%
=================================
</TABLE>
Other Income
Other income decreased $61,000 or 3.0% to $1,967,000 in the first six
months of 1995 as compared with $2,028,000 in the same period of 1994. The
following table sets forth information regarding the major components of and
changes in other income (dollars in thousands).
<TABLE>
<CAPTION>
Change
Six Months Ended June 30, 1995/1994
1995 1994 Amount Percent
<S> <C> <C> <C> <C>
Trust fees $ 608 $ 638 $ (30) (4.7)%
Brokerage and annuity fees 90 217 (127) (58.5)
Service charges 749 685 64 9.3
Securities gains, net - 21 (21) (100.0)
Mortgage banking income 98 99 (1) (1.0)
Other 422 368 54 14.7
Total other income $1,967 $2,028 $ (61) (3.0)%
========================== ==================
</TABLE>
Revenues from brokerage and annuity fees have declined significantly in
1995 as compared to 1994. During 1994, yields on annuity products were
higher, sometimes by as much as 200 basis points, than rates offered on
traditional certificates of deposits. During late 1994 and throughout 1995
however, this rate disparity has disappeared as CD yields have increased and
annuity yields have decreased. Accordingly, consumer preference has shifted
away from the annuity product. Management does not anticipate that annuity
sales will increase significantly from their 1995 levels until such time as
these products again attain a rate advantage over certificates of deposits.
Service charges on deposits consists of fees on both interest bearing and
non-interest bearing accounts and charges for other items, including
insufficient funds, overdrafts and stop payment requests. Service charges on
deposits increased $64,000 or 9.3% for the six month period ended June 30,
1995 as compared with the same period in 1994. During mid-1994, the
Registrant adopted a revised schedule for such fees which has resulted in
most of the increase.
Other income for the second quarter of 1995 decreased $22,000 (2.2%) to
$984,000 from $1,006,000 in the second quarter of 1994. Lower brokerage and
annuity fees and other income caused a decrease of $101,000 for the
Registrant. Offsetting this $101,000 was an increase in trust fees, service
24<PAGE>
charges and mortgage banking income of $7,000, $28,000 and $44,000 respectively.
Other Expense
Other expense increased $992,000 or 15.7% to $7,323,000 in the first six
months of 1995 as compared with $6,331,000 in the first six months of 1994.
Most of this increase is attributable to the acquisition of Downstate
Bancshares, Inc. that occurred early in the fourth quarter of 1994. Other
expense as a percentage of average assets remained stable at 1.6% during the
first six months of 1995 and 1994. The following table sets forth
information regarding the major components of and changes in other expense
(dollars in thousands).
<TABLE>
<CAPTION>
Change
Six Months Ended June 30, 1995/1994
1995 1994 Amount Percent
<S> <C> <C> <C> <C>
Salaries and employee benefits $3,726 $3,414 $ 312 9.1%
Occupancy, furniture and
equipment, net 1,118 940 178 18.9
Federal deposit insurance
premiums 442 392 50 12.8
Other 2,037 1,585 452 28.5
Total other expense $7,323 $6,331 $ 992 15.7%
========================== ================
</TABLE>
Salaries and employee benefits, the largest component of other expense,
increased $312,000 or 9.1% during the first six months of 1995 as compared
with the same period in 1994. The increase was due to a rise in the number
of employees on staff (as a result of the aforementioned acquisition) during
the comparable periods and regular merit increases which affected payroll
beginning January 1, 1995.
Net occupancy, furniture and equipment expenses increased $178,000 or 18.9%
during the first six months of 1995 compared with the same period in 1994.
This increase is attributable in part to the additional buildings and fixed
assets acquired as a result of the acquisition in the fourth quarter of 1994
and in part to the remodeling of the Mattoon and Charleston banking
facilities.
FDIC insurance premiums increased $50,000 or 12.8% in the first half of
1995 compared with 1994 entirely due to the increase in deposits. The FDIC
premium rate for the Registrant has remained stable at $.23 per $100 of
deposits since the last rate increase effective July 1, 1991.
Other expense increased $452,000 or 28.5% for the first six months of 1995
as compared with the same period of 1994. This increase is attributable to a
$62,000 or 32.4% increase in advertising, donations and public relations
expense. ATM expense increased $21,000 or 50.1% due to the addition of
several ATMs during the first six months of 1995. Professional fees
associated with certain consulting engagements increased $36,000 or 12.0% for
the first six months of 1995 as compared with the comparable period of 1994.
Amortization expense increased $150,000 or 97.1% due to the additional
goodwill from the Downstate acquisition.
Other expense for the second quarter of 1995 totaled $3,711,000 as compared
25<PAGE>
to $3,235,000 during the second quarter of 1994. This increase of $476,000
or 14.7% consisted of higher levels in salaries and benefits of $160,000,
occupancy expense of $78,000, FDIC premiums of $26,000 and other of $212,000.
Income Taxes
The Registrant recorded income tax expense of $858,000 for the six months
ended June 30, 1995, as compared to $654,000 for the same period in 1994.
The effective income tax rate was 31.0% for the six months ended June 30,
1995, as compared with 28.7% in the same period in 1994. Tax exempt interest
as a percentage of total interest income declined in 1995, which contributed
to the slightly higher tax rates. Income tax expense for the second quarter
of 1995 amounted to $453,000 as compared to $329,000 in the second quarter of
1994. The effective tax rate for the second quarter of 1995 was 32.3% as
compared to 28.9% for the same period in 1994.
Liquidity
Liquidity represents the ability of the Registrant and its subsidiaries to
meet the present and future requirements of customers for new loans and
deposit withdrawals. Liquidity management focuses on the ability to obtain
funds economically and to maintain assets which may be converted into cash at
minimal costs. The Registrant has provided for its liquidity needs through
growth in core deposits, maturing loans and investment securities, and by
maintaining adequate balances in other short-term investments. Management
continually and carefully monitors its expected liquidity requirements,
focusing primarily on cash flows from operating, investing and financing
activities.
A summary of the Registrant's cash flows from these sources during the
three and six month periods ended June 30, 1995 and 1994 follows (in
thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Cash Flow provided by (used in):
Operating Activities $ 1,494 $ 2,286 $ 3,446 $ 4,517
Investing Activities (8,063) (5,425) (9,573) (6,625)
Financing Activities 511 4,850 9,062 (4,728)
Total $ (6,058) $ 1,711 $ 2,935 $ (6,836)
==================== ====================
</TABLE>
The Registrant's need for liquidity is influenced by several factors. The
increased loan demand brought on by the economic expansion in the
Registrant's market area and management's strategic objective of originating
and retaining loans in Heartland's portfolio. Also affecting the
Registrant's cash flow is its relationship with seasonal customers such as
public entities, highway contractors and those associated with the
agricultural industry.
Capital Resources
The Registrant and its subsidiaries have capital ratios which are above the
fully-phased in regulatory capital requirements. The 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.
26<PAGE>
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 June 30, 1995, the Registrant's leverage ratio was 5.96%.
A tabulation of the Registrant's and its subsidiaries' risk-based capital
ratios as of June 30, 1995, follows:
<TABLE>
<CAPTION>
Tier One
Risk-Based Total Risk-Based
Capital Ratio Capital Ratio
<S> <C> <C>
First Mid-Illinois Bancshares, Inc. 10.08% 11.07%
First Mid-Illinois Bank & Trust, N.A. 11.90% 12.96%
Heartland Savings Bank 16.28% 16.94%
===============================
</TABLE>
Banks and bank holding companies are generally expected to operate at or
above the minimum capital requirements. These ratios are well in excess of
regulatory minimums and will allow the Registrant to operate without capital
adequacy concerns.
Operating Ratios
The following table presents selected financial ratios for the six months
ended June 30, 1995 (annualized) and the years ended December 31, 1994 and
1993:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Return on average total assets .84% .83% .85%
Return on average stockholders' equity 11.91% 11.35% 11.80%
Dividend payout ratio 18.75% 20.89% 21.40%
Average total equity to average assets ratio 7.04% 7.38% 7.17%
============================
</TABLE>
27<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
There are no material pending legal proceedings to which the
Registrant or any of its subsidiaries is a party other than ordinary
routine litigation incidental to their respective businesses.
Item 2. Changes in Securities.
Not applicable.
Item 3. Defaults upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
On May 17, 1995, the Annual Meeting of Stockholders was held. At
the meeting, Charles A. Adams, Daniel E. Marvin, Jr. and Ray Anthony
Sparks were elected to serve as Class III directors with term
expiring in 1998. Continuing Class I directors (term expires in
1996) are Kenneth R. Diepholz and Gary W. Melvin and continuing
Class II directors (term expires in 1997) are Richard Anthony
Lumpkin, William G. Roley and William S. Rowland. The stockholders
also ratified the appointment of KPMG Peat Marwick, LLP as the
Registrant's independent public accountants for the year ending
December 31, 1995.
There were 885,140 issued and outstanding shares of Common Stock at
the time of the Annual Meeting. The voting on each item presented
at the meeting was as follows:
Election of Directors For Withheld
Charles A. Adams 794,287 3,996
Daniel E. Marvin, Jr. 794,287 3,996
Ray Anthony sparks 793,887 4,396
The stockholders also voted to ratify the appointment of the
Registrant's auditors.
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27. Financial Data Schedule
(b) Form 8-K
None filed during the three month period ended June 30, 1995.
28<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)
Date: July 31, 1995 /s/ Daniel E. Marvin, Jr.
____________________ _____________________________________
Daniel E. Marvin, Jr.
President and Chief Executive Officer
Date: July 31, 1995 /s/ William S. Rowland
____________________ ____________________________________
William S. Rowland
Chief Financial Officer
29<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 15,563,000
<INT-BEARING-DEPOSITS> 759,000
<FED-FUNDS-SOLD> 4,425,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 64,321,000
<INVESTMENTS-CARRYING> 64,021,000
<INVESTMENTS-MARKET> 63,486,000
<LOANS> 295,805,000
<ALLOWANCE> 2,696,000
<TOTAL-ASSETS> 464,706,000
<DEPOSITS> 389,270,000
<SHORT-TERM> 29,480,000
<LIABILITIES-OTHER> 4,506,000
<LONG-TERM> 7,700,000
<COMMON> 3,580,000
0
3,100,000
<OTHER-SE> 27,070,000
<TOTAL-LIABILITIES-AND-EQUITY> 464,706,000
<INTEREST-LOAN> 12,004,000
<INTEREST-INVEST> 3,906,000
<INTEREST-OTHER> 204,000
<INTEREST-TOTAL> 16,114,000
<INTEREST-DEPOSIT> 7,148,000
<INTEREST-EXPENSE> 749,000
<INTEREST-INCOME-NET> 8,217,000
<LOAN-LOSSES> 90,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 7,323,000
<INCOME-PRETAX> 2,771,000
<INCOME-PRE-EXTRAORDINARY> 2,771,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,913,000
<EPS-PRIMARY> 2.00
<EPS-DILUTED> 1.90
<YIELD-ACTUAL> 3.99
<LOANS-NON> 283,000
<LOANS-PAST> 400,000
<LOANS-TROUBLED> 664,000
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,608,000
<CHARGE-OFFS> 40,000
<RECOVERIES> 38,000
<ALLOWANCE-CLOSE> 2,696,000
<ALLOWANCE-DOMESTIC> 2,696,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 803,000
</TABLE>
