8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported):
DECEMBER 31, 2009
FIRST MID-ILLINOIS BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
Delaware	0-13368		37-1103704
(State of other jurisdiction	(Commission File Number)		(IRS Employer
of incorporation)			Identification No.)
1515 CHARLESTON AVENUE
MATTOON, IL		61938
(Address of principal executive offices)		(Zip Code)
(217) 234-7454
(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[ ]	Written communications pursuant to Rule 425 under the Securities Act (17CFR 230.425)
[ ]	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17CFR 240.14a-12)
[ ]	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17CFR 240.14d-2(b))
[ ]	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition

Incorporated by reference is the quarterly stockholder report issued by the Registrant on February 2, 2010, attached as Exhibit 99, providing information concerning the Registrant's financial statements and operations as of December 31, 2009.

Item 9.01. Financial Statements and Exhibits

(d)  Exhibits

Exhibit 99 - Quarterly stockholder report as of and for the period ending December 31, 2009.

SIGNATURE

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 hereunto duly authorized.

                                                                FIRST MID-ILLINOIS BANCSHARES, INC.

Dated: February 2, 2010                       ____________________________________

                                                                Michael L. Taylor

                                                                 Executive Vice President and Chief Financial Officer

INDEX TO EXHIBITS

Exhibit
Number	Description
99	Quarterly Report to Stockholders

EX-99

Exhibit 99

[GRAPHIC OMITTED][GRAPHIC OMITTED]

As part of my comments in last year’s annual report, I said, “2008 will no doubt go down as one of the most turbulent years in the history of our country’s economy and banking system.” During 2009, much of the turbulence subsided, but, unfortunately, the country remains in a deep recession that continues to place a great deal of stress on the banking system and on individual banks. The economy had its effect on our operations in 2009 and our net income declined to $8.2 million from $10.5 million in 2008. While still a respectable number which will certainly compare well with other banks of similar size, it is nevertheless something of a disappointment to us.

A number of factors contributed to the earnings decline. Chief among these were:

·   An increase in FDIC insurance premiums from $158 thousand in 2008 to $1.9 million in 2009. This results from the significant decline in the reserves of the FDIC fund during 2009. I expect these rates to continue to be high for the next several years as the FDIC fund charges healthy banks to absorb losses from banks which fail; and

·   Write downs (the accounting term is other than temporary impairment charges) on certain investment securities of $1.8 million in 2009. These securities are what is known as trust preferred securities and are pooled debt obligations of other banks. These securities were acquired some years ago and performed well until recently. Unfortunately, when some of these banks came under credit stress, they frequently deferred payment or in a few cases defaulted on their obligations, thereby reducing the yield on the investments as well as the value of the securities.

We managed our overhead well in 2009 and, exclusive of FDIC premiums, expenses remained unchanged at $31.3 million – the same level as in 2008.  Insurance revenue was basically unchanged at $1.9 million for 2009 compared with $2.0 million in 2008, and mortgage banking revenue increased slightly to $664 thousand in 2009 from $437 thousand in 2008. Trust and brokerage revenue declined to $2.6 million in 2009 from $3.2 million in 2008, mostly as a result of reduced market values on equity securities earlier in the year.

During the first quarter of 2009, we strengthened our capital base through a private placement of convertible preferred stock. Our capital is very strong both in absolute and in ratio terms and we ended 2009 as we began it, with a great deal of balance sheet liquidity. During 2009 we maintained our common dividend at $.38 per share and continued to acquire our own stock when it became available in the market place.

In a recession, no aspect of a bank’s operations is under more stress than its lending activities. During 2009, risk management was an important focus of management. While a prudent strategy, non-performing loans nevertheless increased to  $12.7 million on December 31, 2009 from $7.3 million on December 31, 2008. At 1.81%, the ratio of non-performing loans to total loans is quite manageable and remains well below peer average. Nevertheless, it is unacceptable and inconsistent with the credit culture we have developed at First Mid.

As we think about 2010 and the challenges we face, we have three priorities:

·   Risk Management;

·   Expense Management; and

·   Opportunistic Growth.

The first two priorities are key to success in any business but are especially important now given the uncertain economic and bank regulatory environment we face. I believe that in large part, lasting value in a bank is created by avoiding mistakes, so risk management remains a high priority. That said, I also believe we are entering a period where growth opportunities will present themselves. It is true that the economy had a negative effect on our 2009 earnings, but the problems of many other banks, large and small, are much more acute and will be more complicated to solve. The strength and liquidity of our balance sheet and, even more importantly, the capabilities of our management and Board put us in a strategically sound position.

In 2010, we will observe our 145th anniversary. Over that period, the current team and those before us have managed our way through many economic cycles and downturns. While this economic cycle is as severe as the banking system has seen in several decades, we have maintained our position as a stable long-term provider of financial services. We have focused our efforts on building capital, maintaining adequate liquidity, identifying and working through problem loans, and ensuring that our core operating earnings remain strong. We are a stable, strong community-based organization. We did not need or ask for any “bail out” from the government and we are well positioned to take advantage of opportunities which may present themselves.

Thank you for your continued support of First Mid-Illinois Bancshares, Inc.

Very Truly Yours,

/s/ William S. Rowland

William S. Rowland

Chairman and Chief Executive Officer

February 2, 2010

First Mid-Illinois Bancshares, Inc.

1515 Charleston Avenue

Mattoon, Illinois 61938

217-234-7454

www.firstmid.com

CONDENSED CONSOLIDATED BALANCE SHEETS
	(unaudited)
(in thousands, except share data)	Dec 31			Dec 31
	2009			2008
Assets
Cash and due from banks	$	20,243		$	17,756
Federal funds sold and other interest-bearing deposits		79,512			68,887
Investment securities:
Available-for-sale, at fair value		238,697			169,476
Held-to-maturity, at amortized cost (estimated fair value of $469 and
$610 at December 31, 2009 and 2008, respectively)		459			599
Loans		700,750			741,938
Less allowance for loan losses		(9,462	)		(7,587	)
Net loans		691,288			734,351
Premises and equipment, net		15,487			14,985
Goodwill, net		17,363			17,363
Intangible assets, net		2,832			3,562
Other assets		29,274			22,721
Total assets	$	1,095,155		$	1,049,700
Liabilities and Stockholders’ Equity
Deposits:
Non-interest bearing	$	128,726		$	119,986
Interest bearing		711,684			686,368
Total deposits		840,410			806,354
Repurchase agreements with customers		80,386			80,708
Other borrowings		32,750			50,750
Junior subordinated debentures		20,620			20,620
Other liabilities		9,768			8,490
Total liabilities		983,934			966,922
Stockholders’ Equity:
Preferred stock (no par value, authorized 1,000,000 shares; issued
4,927 shares in 2009)		24,635			-
Common stock ($4 par value; authorized 18,000,000 shares; issued
7,364,959 shares in 2009 and 7,254,117 shares in 2008)		29,460			29,017
Additional paid-in capital		26,811			25,289
Retained earnings		62,144			58,059
Deferred compensation		2,894			2,787
Accumulated other comprehensive income (loss)		464			(416	)
Treasury stock at cost, 1,279,583 shares in 2009
and 1,121,273 in 2008		(35,187	)		(31,958	)
Total stockholders’ equity		111,221			82,778
Total liabilities and stockholders’ equity	$	1,095,155		$	1,049,700

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands) (unaudited)
For the years ended December 31,	2009			2008
Interest income:
Interest and fees on loans	$	42,146		$	47,748
Interest on investment securities		9,036			8,559
Interest on federal funds sold & other deposits		227			759
Total interest income		51,409			57,066
Interest expense:
Interest on deposits		12,970			16,592
Interest on repurchase agreements with customers		129			872
Interest on other borrowings		1,634			2,484
Interest on subordinated debt		1,104			1,396
Total interest expense		15,837			21,344
Net interest income		35,572			35,722
Provision for loan losses		3,594			3,559
Net interest income after provision for loan losses		31,978			32,163
Non-interest income:
Trust revenues		2,229			2,666
Brokerage commissions		424			574
Insurance commissions		1,912			1,978
Services charges		4,952			5,571
Securities gains (losses), net		637			293
Impairment losses on securities		(1,812	)		-
Mortgage banking revenues		664			437
Other		4,449			3,745
Total non-interest income		13,455			15,264
Non-interest expense:
Salaries and employee benefits		16,830			16,876
Net occupancy and equipment expense		4,989			4,959
FDIC insurance		1,943			158
Amortization of intangible assets		730			766
Other		8,720			8,701
Total non-interest expense		33,212			31,460
Income before income taxes		12,221			15,967
Income taxes		4,007			5,443
Net income	$	8,214		$	10,524
Per Share Information (unaudited)
For the years ended December 31,		2009			2008
Basic earnings per common share	$	1.04		$	1.69
Diluted earnings per common share	$	1.04		$	1.67
Book value per share at Dec 31	$	14.23		$	13.50
Market price of stock at Dec 31	$	17.50		$	22.20

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(In thousands) (unaudited)
For the years ended December 31,	2009			2008
Balance at beginning of period	$	82,778		$	80,452
Net income		8,214			10,524
Dividends on preferred stock and common stock		(4,129	)		(2,360	)
Issuance of preferred and common stock		26,382			1,960
Purchase of treasury stock		(3,122	)		(6,784	)
Deferred compensation and other adjustments		218			498
Changes in accumulated other comprehensive income (loss)		880			(1,512	)
Balance at end of period	$	111,221		$	82,778

CONSOLIDATED CAPITAL RATIOS				Threshold
	As of			for “Well-
First Mid-Illinois Bancshares, Inc.	Dec 31,			Capitalized”
Primary Capital Measurements (unaudited):	2009			Designation
Leverage ratio		10.63	%		5	%
Tier 1 capital to risk-weighted assets		14.57	%		6	%
Total capital to risk-weighted assets		15.76	%		10	%