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):
OCTOBER 18, 2013
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.)
1421 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 First Mid-Illinois Bancshares, Inc. (the "Company") on October 23, 2013, attached as Exhibit 99.1, providing information concerning the Company's financial statements and operations as of September 30, 2013.

Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On October 23, 2013, the Company issued a press release announcing that its Chairman, President and Chief Executive Officer, William S. Rowland, informed the Company on October 18, 2013 that he will retire from the Company effective at the close of business on December 31, 2013. Following his retirement, Mr. Rowland will remain on the Board of Directors of the Company and each of its subsidiaries, First Mid-Illinois Bank & Trust, N.A. (the “Bank”), Mid-Illinois Data Services, Inc. (“Data Services”) and The Checkley Agency, Inc., doing business as First Mid Insurance Group (the “Insurance Group”). A copy of the press release is attached as Exhibit 99.2 and is incorporated by reference herein.

The Company’s October 23, 2013 press release also announces that on October 22, 2013, the Company appointed Joseph R. Dively, age 54, who has served as the Senior Executive Vice President of the Company and the President of the Bank since May 9, 2011, to become the Chairman, President and Chief Executive Officer of the Company, in addition to retaining his position as President of the Bank, effective upon Mr. Rowland’s retirement from the Company.

In addition to serving as the Senior Executive Vice President of the Company and the President of the Bank since 2011, Mr. Dively has been a member of the Boards of Directors of the Company and the Bank since 2004. Since 2009, he has also served as a member of the Boards of Directors of Data Services and the Insurance Group. Prior to assuming his positions as the Senior Executive Vice President of the Company and the President of the Bank, Mr. Dively served, from 2003 to 2011, as the Senior Vice President of Consolidated Communications Holdings, Inc., a Mattoon, Illinois based telecommunications holding company. Mr. Dively worked for Consolidated Communications Holdings, Inc. and its affiliates from 1991 to 2011.

On October 22, 2013, the Company and Mr. Dively entered into an Amended and Restated Employment Agreement, effective January 1, 2014 and continuing until December 31, 2016, under which Mr. Dively agrees to serve as the President and Chief Executive Officer of the Company and the President of the Bank (the “Dively Agreement”). Under the Dively Agreement, Mr. Dively will receive an annual base salary of $320,000 and will participate in the Company’s Incentive Compensation Plan, with potential annual cash incentive compensation of up to 50% of his annual base salary, Deferred Compensation Plan and 2007 Stock Incentive Plan. The Dively Agreement also provides Mr. Dively with severance benefits in the event of the termination of his employment under certain circumstances and contains certain confidentiality and non-competition and non-solicitation provisions. The Dively Agreement is filed as Exhibit 10.1 hereto and is incorporated by reference herein. This summary of the Dively Agreement does not purport to be complete and is qualified in its entirety by reference to the Dively Agreement.

Item 9.01. Financial Statements and Exhibits

(d)  Exhibits

Exhibit 10.1 Amended and Restated Employment Agreement between First Mid-Illinois Bancshares, Inc. and Joseph R. Dively, effective January 1, 2014

Exhibit 99.1 Quarterly stockholder report as of and for the period ending September 30, 2013

Exhibit 99.2 Press Release, October 23, 2013

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: October 23, 2013

                                                            Michael L. Taylor

                                                            Executive Vice President and Chief Financial Officer

INDEX TO EXHIBITS

Exhibit
Number	Description
10.1	Amended and Restated Employment Agreement between First Mid-Illinois Bancshares, Inc. and Joseph R. Dively, effective January 1, 2014
99.1	Quarterly Report to Stockholders
99.2	Press Release, October 23, 2013

EX-10.1

Exhibit 10.1

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

This Amended and Restated Employment Agreement (the “Agreement”) is made and entered into this 22nd day of October, 2013, by and between First Mid-Illinois Bancshares, Inc. (“the Company”), a corporation with its principal place of business located in Mattoon, Illinois, and Joseph R. Dively (“Executive”).

WHEREAS, the Company and Executive are party to that certain Employment Agreement, dated as of April 27, 2011 and effective as of May 9, 2011 (the “Original Employment Agreement”), pursuant to which the Company agrees to employ Executive as Senior Vice President of the Company and President of First Mid-Illinois Bank and Trust, N.A. (the “Bank”); and

WHEREAS, the Company and Executive are hereby agreeing to amend and restate the Original Agreement in its entirety on the terms and subject to the conditions set forth herein.

NOW, THEREFORE, in consideration of the promises and mutual covenants and agreements contained herein, the parties hereto acknowledge and agree as follows:

ARTICLE ONE

TERM AND NATURE OF AGREEMENT

1.01     Term of Agreement. The term of this Agreement shall commence on January 1, 2014 (the “Effective Date”) and shall continue until December 31, 2016. Thereafter, unless Executive’s employment with the Company has been previously terminated, Executive shall continue his employment with the Company on an at will basis and, except as provided in Articles Five, Six and Seven, this Agreement shall terminate unless extended by mutual written agreement. The Original Agreement shall continue to be effective and in full force and effect at all times from the date hereof up until the Effective Date, at which time this Agreement shall amend and replace the Original Agreement in its entirety.

1.02     Employment. The Company agrees to employ Executive as President and Chief Executive Officer of the Company, and to continue to employ Executive as President of the Bank, commencing on the Effective Date. Executive accepts such employment by the Company on the terms and conditions herein set forth. The duties of Executive shall be determined by the Company’s Board of Directors and Executive shall adhere to the policies and procedures of the Company and shall follow the supervision and direction of the Board in the performance of such duties. During the term of his employment, Executive agrees to devote his full working time, attention and energies to the diligent and satisfactory performance of his duties hereunder. Executive shall not, while he is employed by the Company, engage in any activity which would (a) interfere with, or have an adverse effect on, the reputation, goodwill or any business relationship of the Company or any of its subsidiaries; (b) result in economic harm to the Company or any of its subsidiaries; or (c) result in a breach of Section Six of the Agreement.

ARTICLE TWO

COMPENSATION AND BENEFITS

While Executive is employed with the Company during the term of this Agreement, the Company shall provide Executive with the following compensation and benefits:

2.01     Base Salary. The Company shall pay Executive an annual base salary of $320,000 per fiscal year, payable in accordance with the Company’s customary payroll practices for executive employees. The Board may review and adjust Executive’s base salary from year to year; provided, however, that during the term of Executive’s employment, the Company shall not decrease Executive’s base salary.

2.02     Incentive Compensation Plan. Executive shall participate in the First Mid-Illinois Bancshares, Inc. Incentive Compensation Plan in accordance with the terms and conditions of such Plan. Pursuant to the Plan, Executive shall have an opportunity to receive incentive compensation of up to a maximum of 50% of Executive’s annual base salary. The incentive compensation payable for a particular fiscal year will be based upon the attainment of the performance goals in effect under the Plan for such year and will be paid in accordance with theterms of the Plan and at the sole discretion of the Board.

2.03     Deferred Compensation Plan. Executive may participate in the First Mid-Illinois Bancshares, Inc. Deferred Compensation Plan in accordance with the terms and conditions of such Plan.

2.04     Stock Incentive Plan. Executive may participate in the First Mid-Illinois Bancshares, Inc. 2007 Stock Incentive Plan.

2.05     Vacation. Executive shall be entitled to four (4) weeks of paid vacation each year during the term of this Agreement.

2.06    Fringe Benefits. The Company shall provide the following additional fringe benefits to Executive:

(a)    Use of a Company-owned or leased vehicle for professional and personal use, or an $800 per month vehicle allowance for such uses, as may be agreed to by the Company and Executive.

(b)    An amount equal to the annual dues for a Class “H” membership at the Mattoon Golf and Country Club.

2.07     Other Benefits. Executive shall be eligible (to the extent he qualifies) to participate in any other retirement, health, accident and disability insurance, or similar employee benefit plans as may be maintained from time to time by the Company for its other executives or employees subject to and on a consistent basis with the terms, conditions and overall administration of such plans.

2.08     Business Expenses. Executive shall be entitled to reimbursement by the Company for all reasonable expenses actually and necessarily incurred by him on its behalf in the course of his employment hereunder and in accordance with expense reimbursement plans and policies of the Company from time to time in effect for executive employees.

2.09     Withholding. All salary, incentive compensation and other benefits provided to Executive pursuant to this Agreement shall be subject to withholding for federal, state or local taxes, amounts withheld under applicable employee benefit plans, policies or programs, and any other amounts that may be required to be withheld by law, judicial order or otherwise or by agreement with, or consent of, Executive.

ARTICLE THREE

DEATH OF EXECUTIVE

This Agreement shall terminate prior to the end of the term described in Section 1.01 upon Executive’s termination of employment with the Company due to his death. Upon Executive’s termination due to death, the Company shall pay Executive’s estate the amount of Executive’s annual base salary and any accrued but unused vacation time earned through the date of such death and any incentive compensation earned for the preceding fiscal year that is not yet paid as of the date of such death.

ARTICLE FOUR

TERMINATION OF EMPLOYMENT

Executive’s employment with the Company may be terminated by Executive or by the Company at any time for any reason. Upon Executive’s termination of employment prior to the end of the term of the Agreement, the Company shall pay Executive as follows:

4.01     Termination by the Company for Other than Cause. If the Company terminates Executive’s employment for any reason other than Cause, the Company shall pay Executive the following:

(a)     An amount equal to Executive’s monthly base salary in effect at the time of such termination of employment for a period of twelve months thereafter. Such amount shall be paid to Executive periodically in accordance with the Company’s customary payroll practices for executive employees.

(b)     The base salary and accrued but unused paid vacation time earned through the date of termination and any incentive compensation earned for the proceeding fiscal year that is not yet paid.

(c)     Continued coverage for executive and/or Executive’s family under the Company’s health plan pursuant to Title I, Part 6 of the Employee Retirement Income Security Act of 1974 (“COBRA”) and for such purpose the date of Executive’s termination of employment shall be considered the date of the “qualifying event” as such term is defined by COBRA. During the twelve month period beginning on the date of such termination, the Executive shall be charged for such coverage in the amount that he would have paid for such coverage had he remained employed by the Company, and for the duration of the COBRA period, the Executive shall be charged for such coverage in accordance with the provisions of COBRA.

For purposes of this Agreement, “Cause” shall mean Executive’s (i) conviction in a court of law of (or entering a plea of guilty or no contest to) any crime or offense involving fraud, dishonesty or breach of trust or involving a felony; (ii) performance of any act which, if known to the customers, clients, stockholders or regulators of the Company, would materially and adversely impact the business of the Company; (iii) act or omission that causes a regulatory body with jurisdiction over the Company to demand, request, or recommend that Executive be suspended or removed from any position in which Executive serves with the Company; (iv) substantial nonperformance of any of his obligations under this Agreement; (v) misappropriation of or intentional material damage to the property or business of the Company or any affiliate; or (vi) breach of Article Five or Six of this Agreement.

4.02     Termination Following a Change in Control. Notwithstanding Section 4.01, if, following a Change in Control, Executive’s employment is terminated by the Company (or any successor thereto) for any reason other than Cause, or if Executive terminates his employment because of a decrease in his then current base salary or a substantial diminution in his position and responsibilities, the Company (or any successor thereto) shall pay Executive the following:

(a)     Two times Executive’s annual base salary in effect at the time of such termination. Such amount shall be paid periodically in accordance with the Company’s or successor’s customary payroll practices for executive employees.

(b)     An amount equal to the incentive compensation earned by or paid to Executive for the fiscal year immediately preceding the year in which Executive’s termination of employment occurs. Such amount shall be paid to Executive in a lump sum as soon as practicable after the date of his termination.

(c)     The base salary and accrued but unused paid vacation time earned through the date of termination and any incentive compensation earned for the preceding fiscal year that is not yet paid.

(d)     Continued coverage for Executive and/or Executive’s family under the Company’s health plan pursuant to Title I, Part 6 of the Employee Retirement Income Security Act of 1974 (“COBRA”) and for such purpose the date of Executive’s termination of employment shall be considered the date of the “qualifying event” as such term is defined by COBRA. During the twelve month period beginning on the date of such termination, the Executive shall be charged for such coverage in the amount that he would have paid for such coverage had he remained employed by the Company, and for the duration of the COBRA period, the Executive shall be charged for such coverage in accordance with the provisions of COBRA.

For the purposes of this Agreement, “Change of Control” shall have the meaning as set forth in the First Mid-Illinois Bancshares, Inc. 2007 Stock Incentive Plan (or successor stock incentive plan maintained by the Company).

4.03     Other Termination of Employment. If, prior to the end of the term of this Agreement, the Company terminates Executive’s employment for Cause, or if Executive terminates his employment for any reason other than as described in Section 4.02 above, the Company shall pay Executive the base salary and accrued but unused paid vacation time earned through the date of such termination and any incentive compensation earned for the preceding fiscal year that is not yet paid.

4.04     Key Employee Status. If at the time of such termination of employment Executive is a “Key Employee” as defined in Section 416(i) of the Internal Revenue Code (without reference to paragraph thereof), and the amounts payable to Executive pursuant to Article Four are subject to Section 409A of the Internal Revenue Code, payment of such amounts shall not commence until six months following Manager’s termination of employment, with the first payment to include the payments that otherwise would have been made during such six-month period.

ARTICLE FIVE

CONFIDENTIAL INFORMATION

5.01     Non-Disclosure of Confidential Information. During his employment with Company, and after his termination of such employment, for any reason, with the Company, Executive shall not, in any form or manner, directly or indirectly, use, divulge, disclose or communicate to any person, entity, firm, corporation or any other third party, any Confidential Information, except as required in the performance of Executive’s duties hereunder, as required by law or as necessary in conjunction with legal proceedings.

5.02     Definition of Confidential Information. For the purposes of this Agreement, the term “Confidential Information” shall mean any and all information either developed by Executive during his employment with the Company and used by the Company or its affiliates or developed by or for the Company or its affiliates of which Executive gained knowledge by reason of his employment with the Company that is not readily available in or known to the general public or the industry in which the Company or any affiliate is or becomes engaged. Such Confidential Information shall include, but shall not be limited to, any

technical or non-technical data, formulae, compilations, programs, devices, methods, techniques, procedures, manuals, financial data, business plans, lists of actual or potential customers, lists of employees and any information regarding the Company’s or any affiliate’s products, marketing or database. The Company and Executive acknowledge and agree that such Confidential Information is extremely valuable to the Company and may constitute trade secret information under applicable law. In the event that any part of the Confidential Information becomes generally known to the public through legitimate origins (other than by the breach of this Agreement by Executive or by other misappropriation of the Confidential Information), that part of the Confidential Information shall no longer be deemed Confidential Information for the purposes of this Agreement, but Executive shall continue to be bound by the terms of this Agreement as to all other Confidential Information.

5.03     Delivery upon Termination. Upon termination of Executive’s employment with the Company for any reason, Executive shall promptly deliver to the Company all correspondence, files, manuals, letters, notes, notebooks, reports, programs, plans, proposals, financial documents, and any other documents or data concerning the Company’s or any affiliate’s customers, database, business plan, marketing strategies, processes or other materials which contain Confidential Information, together with all other property of the Company or any affiliate in Executive’s possession, custody or control.

ARTICLE SIX

NON-COMPETE AND NON-SOLICITATION COVENANTS

6.01     Covenant Not to Compete. During the term of this Agreement and for a period of two years following the later of the termination of Executive’s employment for any reason, Executive shall not, on behalf of himself or on behalf of another person, corporation, partnership, trust or other entity, within a one hundred mile radius of any location where the Company or any affiliate conducts business.

(a)     Directly or indirectly own, manage, operate, control, participate in the ownership, management, operation or control of, be connected with or have any financial interest in, or serve as an officer, employee, advisor, consultant, agent or otherwise to any person, firm, partnership, corporation, trust or other entity which owns or operates a business similar to that of the Company or its affiliates.

(b)     Solicit for sale, represent, and/or sell Competing Products to any person or entity who or which was the Company’s customer or client during the last two years of Executive’s employment. “Competing Products,” for purposes of this Agreement, means products or services which are similar to, compete with, or can be used for the same purposes as products or services sold or offered for sale by the Company or any affiliate or which were in development by the Company or any affiliate within the last two years of Executive’s employment.

6.02     Covenant Not to Solicit. For a period of two years following the later of the termination of Executive’s employment for any reason or the last day of the term of this Agreement, Executive shall not:

(a)     Attempt in any manner to solicit from any client or customer business of the type performed by the Company or any affiliate or persuade any client or customer of the Company or any affiliate to cease to do such business or to reduce the amount of such business which any such client or customer has customarily done or contemplates doing with the Company or any affiliate, whether or not the relationship between the Company or affiliate and such client or customer was originally established in whole or in part through Executive’s efforts.

(b)     Render any services of the type rendered by the Company or any affiliate for any client or customer of the Company.

(c)     Solicit or encourage, or assist any other person to solicit or encourage, any employees, agents or representatives of the Company or an affiliate to terminate or alter their relationship with the Company or any affiliate.

(d)     Do not cause to be done, directly or indirectly, any acts which may impair the relationship between the Company or any affiliate with their respective clients, customers or employees.

ARTICLE SEVEN

REMEDIES

Executive acknowledges that compliance with the provisions of Articles Five and Six herein is necessary to protect the business, goodwill and proprietary information of the Company and that a breach of these covenants will irreparably and continually damage the Company for which money damages may be inadequate. Consequently, Executive agrees that, in the event that he breaches or threatens to breach any of these provisions, the Company shall be entitled to both (a) a temporary,

preliminary or permanent injunction in order to prevent the continuation of such harm; and (b) money damages insofar as they can be determined. In addition, the Company will cease payment of all compensation and benefits under Articles Three and Four hereof. In the event that any of the provisions, covenants, warranties or agreements in this Agreement are held to be in any respect an unreasonable restriction upon the Executive or are otherwise invalid, for whatsoever cause, then the court so holding shall reduce, and is so authorized to reduce, the territory to which it pertains and/or the period of time in which it operates, or the scope of activity to which it pertains or effect any other change to the extent necessary to render any of the restrictions of this Agreement enforceable.

ARTICLE EIGHT

MISCELLANEOUS

8.01     Successors and Assignability.

(a)     No rights or obligations of the Company under this Agreement may be assigned or transferred except that the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.

(b)     No rights or obligations of Executive under this Agreement may be assigned or transferred by Executive other than his rights to payments or benefits hereunder which may be transferred only by will or the laws of descent and distribution.

8.02     Entire Agreement.This Agreement contains the entire agreement between the parties with respect to the subject matter hereof and may not be modified except in writing by the parties hereto. Furthermore, the parties hereto specifically agree that all prior agreements, whether written or oral, relating to Executive’s employment by the Company shall be or no further force or effect from and after the date of hereof.

8.03     Severability. If any phrase, clause or provision of this Agreement is deemed invalid or unenforceable, such phrase, clause or provision shall be deemed severed from this Agreement, but will not affect any other provisions of this Agreement, which shall otherwise remain in full force and effect. If any restriction or limitation in this Agreement is deemed to be unreasonable, onerous or unduly restrictive, it shall not be stricken in its entirety and held totally void and unenforceable, but shall be deemed rewritten and shall remain effective to the maximum extent permissible within reasonable bounds.

8.04     Controlling Law and Jurisdiction. This Agreement shall be governed by and interpreted and construed according to the laws of the State of Illinois. The parties hereby consent to the jurisdiction of the state and federal courts in the State of Illinois in the event that any disputes arise under this Agreement.

8.05    Notices. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given (a) on the date of service if served personally on the party to whom notice is to be given; (b) on the day after delivery to an overnight courier service; (c) on the day of transmission if sent via facsimile to the facsimile number given below; or (d) on the third day after mailing, if mailed to the party to whom notice is to be given, by first class mail, registered or certified, postage prepaid and properly addressed, to the party as follows:

If to Executive:        Joseph R. Dively

13179 E CR 720N

Charleston, IL 61920

If to the Company:    First Mid-Illinois Bancshares, Inc.

1515 Charleston Avenue

Mattoon IL 61938

Facsimile: 217-258-0485

Any party may change its address for the purpose of this Section by giving the other party written notice of its new address in the manner set forth above.

[Signature Page Follows]

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.

FIRST MID-ILLINOIS BANCSHARES, INC.

By:    

Title:    Chairman, Compensation Committee                     

EXECUTIVE

Joseph R. Dively

EX-99.1

Exhibit 99.1

[GRAPHIC OMITTED][GRAPHIC OMITTED]

We continue to have solid financial results in 2013 with growth in earnings, strong asset quality, and higher regulatory capital ratios. Net income for the first nine months of 2013 was $11,103,000 compared to $10,516,000 for the first nine months of last year. Diluted earnings per share for the first nine months of 2013 were $1.31 per share compared to $1.22 per share for the same period last year.

Net income is higher than last year as a result of an increase in net interest income due to growth in loans and maintaining our low funding costs, growth in trust and brokerage revenues, more gains recognized on the sale of securities, and higher electronic banking revenues.

Net interest income for the first nine months of 2013 amounted to $37.2 million compared to $36.9 million for the first nine months of 2012. Over the past year, we have deployed excess federal funds sold into loans. Since September 30, 2012, loan balances have increased by $44 million with growth in commercial and agricultural real estate loans. The growth in loans is especially positive considering that economic conditions in Illinois, while improved from the recession, continue to be strained. Over the past few years, we have placed a greater emphasis on agricultural lending by adding professionals with expertise in the industry, increasing our agricultural loan product offerings, and hosting educational sessions for customers and prospective customers. We have benefitted with growth in farmland purchase and refinance loans. While we have grown loan balances, the spread between the interest rate received on loans and investments compared to the amount paid on deposits and borrowings continues to be squeezed as we remain in a historically-low interest rate environment. Our net interest margin for the first nine months of 2013 was 3.46% compared to 3.52% for the first nine months of last year on a tax-equivalent basis. While down from last year, our margin has held up well compared to peer banks as our cost of funds is in the lower quartile of peers.

Year-to-date total non-interest income was $15 million compared to $13.6 million last year. During the third quarter, we completed the sale of two trust preferred securities resulting in a recovery of the book value and a gain of $1.4 million on the sale. These securities were comprised of community bank debt issuances and have increased in value as the banking industry recovers from the recession. This sale accounts for the majority of the increase in securities gains compared to last year. Also, revenues from ATM and debit cards increased due to a greater number of electronic transactions. Revenues from our trust and brokerage areas increased for the first nine months of 2013 compared to the same period last year while insurance revenues declined primarily due to lower contingency income received from carriers based upon our claims experience.

Operating expenses for the first nine months of 2013 were $32.6 million compared to $32 million for the same period last year with increases in salaries from additions to our sales staff and employees added for a new branch location in Decatur.

I mentioned that our asset quality ratios continue to be strong. Total non-performing assets (non-performing loans and other real estate owned) declined to $7.4 million at September 30, 2013 compared to $8.9 million at September 30, 2012. Also, net loan charge-offs for the first nine months of 2013 were $506,000 compared to $1,226,000 for the same period last year. Our coverage ratio of the allowance for loan losses to the level of non-accrual loans is 189% and compares well to other peer banks.

Our regulatory capital ratios have increased in 2013 including the Tier 1 Capital ratio which was 14.99% at September 30, 2013. Our capital ratios remain in excess of the regulatory minimums to be considered well-capitalized. I mentioned during last quarter’s communication that the regulators published capital rules relating to the Basel III initiative in July 2013. We have reviewed the proposal and believe that we will continue to exceed the capital ratios specified in the regulation as they are phased-in over the next several years.

We continue to make progress on our Excellence 2015 initiative. During the quarter, we started developing measurements for our enterprise risk management framework to ensure that our risk management systems in the various business lines are aligned to our enterprise-wide strategy. We also completed training sessions for our senior management group and board. During the third quarter, we opened a new branch facility in Decatur that resulted from our branch network assessment project. The branch is located on Route 36 and is our third location to serve customers in this community. We also completed plans to open a new facility in Bartonville that will replace our current location. Construction is expected to be completed during the 4^th quarter and we are excited about the opportunity to upgrade our facility and offer more services in that community. Overall, we are pleased with the progress we are making through the Excellence 2015 initiative.

With a solid track record of performance, a strong balance sheet, and an experienced management team, First Mid is well-positioned for the future. It has been my pleasure to serve First Mid as Chairman and CEO since 1999 and previously as CFO from 1989 to 1999. I ask that you read the attached press release.

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

Very Truly Yours,

William S. Rowland

Chairman and Chief Executive Officer

October 23, 2013

First Mid-Illinois Bancshares, Inc.

1421 Charleston Avenue

Mattoon, Illinois 61938

217-234-7454

www.firstmid.com

CONDENSED CONSOLIDATED BALANCE SHEETS
	(unaudited)
(in thousands, except share data)	Sep 30			Dec 31
	2013			2012
Assets
Cash and due from banks	$	31,447		$	38,110
Federal funds sold and other interest-bearing deposits	532			44,602
Certificates of deposit investments	—			6,665
Investment securities:
Available-for-sale, at fair value	500,304			508,309
Loans	943,091			911,065
Less allowance for loan losses	(12,977		)	(11,776		)
Net loans	930,114			899,289
Premises and equipment, net	28,828			29,670
Goodwill, net	25,753			25,753
Intangible assets, net	2,650			3,161
Other assets	26,829			22,473
Total assets	$	1,546,457		$	1,578,032
Liabilities and Stockholders’ Equity
Deposits:
Non-interest bearing	$	224,732		$	263,838
Interest bearing	1,039,209			1,010,227
Total deposits	1,263,941			1,274,065
Repurchase agreements with customers	78,114			113,484
Other borrowings	25,000			5,000
Junior subordinated debentures	20,620			20,620
Other liabilities	8,193			8,176
Total liabilities	1,395,868			1,421,345
Stockholders’ Equity:
Preferred stock (no par value, authorized 1,000,000 shares;
issued 10,427 shares in 2013 and 2012)	52,035			52,035
Common stock ($4 par value; authorized 18,000,000 shares;
issued 7,743,254 shares in 2013 and 7,682,535 shares in 2012)	30,973			30,730
Additional paid-in capital	32,963			31,685
Retained earnings	85,529			78,986
Deferred compensation	2,909			2,953
Accumulated other comprehensive income (loss)	(6,922		)	4,544
Treasury stock at cost, 1,824,648 shares in 2013 and
and 1,711,646 in 2012	(46,898		)	(44,246		)
Total stockholders’ equity	150,589			156,687
Total liabilities and stockholders’ equity	$	1,546,457		$	1,578,032

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands) (unaudited)
For the period ended September 30,	2013		2012
Interest income:
Interest and fees on loans	$	31,371	$	32,863
Interest on investment securities	8,435		8,893
Interest on certificates of deposit	14		46
Interest on federal funds sold & other deposits	34		62
Total interest income	39,854		41,864
Interest expense:
Interest on deposits	2,071		3,845
Interest on repurchase agreements with customers	34		100
Interest on other borrowings	189		570
Interest on subordinated debt	393		428
Total interest expense	2,687		4,943
Net interest income	37,167		36,921
Provision for loan losses	1,707		1,751
Net interest income after provision for loan losses	35,460		35,170
Non-interest income:
Trust revenues	2,476		2,371
Brokerage commissions	590		494
Insurance commissions	1,317		1,476
Services charges	3,620		3,537
Securities gains (losses), net	2,291		1,060
Mortgage banking revenues	826		1,038
ATM / debit card revenue	2,819		2,543
Other	1,022		1,081
Total non-interest income	14,961		13,600
Non-interest expense:
Salaries and employee benefits	18,036		17,437
Net occupancy and equipment expense	6,212		6,042
FDIC insurance	632		665
Amortization of intangible assets	511		603
Legal and professional expense	1,621		1,665
Other	5,600		5,549
Total non-interest expense	32,612		31,961
Income before income taxes	17,809		16,809
Income taxes	6,706		6,293
Net income	$	11,103	$	10,516
Per Share Information (unaudited)
For the period ended September 30,	2013		2012
Basic earnings per common share	$	1.31	$	1.22
Diluted earnings per common share	$	1.31	$	1.22
Dividends per common share	$	0.21	$	0.21
Book value per share at Sep 30	$	16.51	$	17.53
OTCBB market price of stock at Sep 30	$	22.33	$	25.50

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(In thousands) (unaudited)
For the period ended September 30,	2013			2012
Balance at beginning of period	$	156,687		$	140,967
Net income	11,103			10,516
Dividends on preferred stock and common stock	(6,778		)	(5,989		)
Issuance of preferred and common stock	1,345			9,942
Purchase of treasury stock	(2,614		)	(1,637		)
Deferred compensation and other adjustments	94			68
Changes in accumulated other comprehensive income	(11,466		)	2,244
Balance at end of period	$	150,589		$	157,688

CONSOLIDATED CAPITAL RATIOS
Primary Capital Measurements (unaudited)	2013		2012
For the period ended September 30,
Leverage ratio	10.2	%	9.83	%
Tier 1 capital to risk-weighted assets	14.99	%	14.73	%
Total capital to risk-weighted assets	16.21	%	15.88	%

EX-99.2

Exhibit 99.2

PRESS RELEASE	For more information contact:
First Mid-Illinois Bancshares, Inc.	Mandy Lewis
1515 Charleston Ave	VP Director of Marketing
Mattoon, IL 61938	217.258.0675
www.firstmid.com	mlewis@firstmid.com
FOR IMMEDIATE RELEASE

First Mid-Illinois Bancshares, Inc. CEO William Rowland to Retire and Dively to Succeed

MATTOON, Illinois - First Mid-Illinois Bancshares, Inc. (First Mid) today announced that its Chairman, President and Chief Executive Officer, William S. Rowland, will retire from his position effective December 31, 2013.

First Mid also announced that Joseph R. Dively will become the Chairman, President and Chief Executive Officer upon Rowland’s retirement. Dively currently serves as Senior Executive Vice President of First Mid and President of its subsidiary, First Mid-Illinois Bank & Trust, N.A (First Mid Bank)..

Rowland’s decision to retire will bring to a close a remarkable career of nearly 25 years of continuous service to First Mid and its stockholders. During that time, Rowland oversaw a remarkable period of growth and expansion for the Central Illinois-based company. When he began his career with the company, First Mid employed fewer than 100 people in five communities. Today it employs more than 400 people in 25 communities.

At 148 years and counting, First Mid is the region’s oldest banking franchise. During Rowland’s tenure, First Mid’s annual net income grew from $1.7 million to a little over $14 million. Total assets grew from $239 million to more than $1.5 billion over the same period, all while maintaining asset quality measurements, which consistently placed First Mid Bank among the best community banks in the nation.

Rowland’s tenure also saw First Mid expand its product offerings substantially to include online banking, bill pay, mobile banking, online account opening services, and a full array of insurance products offered through the First Mid Insurance Group. In addition, First Mid Bank recognized significant growth through the Trust and Wealth Management division with assets growing to over $880 million.

Following his retirement, Rowland will remain on the Board of Directors of First Mid and each of its subsidiaries, First Mid-Illinois Bank & Trust, N.A., Mid-Illinois Data Services, Inc. and First Mid Insurance Group.

"I have thoroughly enjoyed my nearly 25 years of service to First Mid and look forward to continued service as a director,” Rowland said.

“When I joined the organization at the beginning of 1989 it was already well on its way to becoming the respected community bank it is today and I am pleased to have been able to contribute to that success. First Mid has prospered financially, served our customers and our communities well and moreover has provided career opportunities to numerous intelligent and ambitious young men and women. I am very proud of this organization, the integrity that has been at the core of our business strategy and I am especially proud of our team of financial professionals. I am truly grateful to have had the opportunity to lead and be part of First Mid.”

“I am confident this organization will continue to grow and succeed under the leadership of Joe Dively,” Rowland added. “Having worked together over the past two years, Joe’s vision truly aligns with the mission, vision and values that are the foundation of First Mid. I look forward to continuing to work with Joe as a member of the board.”

Joseph Dively, former Senior Vice President of Consolidated Communications Holdings, Inc., served on the First Mid Board of Directors from 2004 until 2011 before joining the management team in 2011.

"Bill Rowland has been an exceptional leader for our company over the past 25 years,” Dively said.

“He’s managed through very turbulent times, built a tremendous team, and continued to hold strong to our mission of serving our customers, employees, communities and shareholders. I am excited to take on this new role and to continue forward with First Mid’s 148 year-old tradition of growth, profitability, and commitment to the communities we serve.”

First Mid-Illinois Bancshares, Inc. provides comprehensive banking, trust and wealth management, and insurance services through its operating subsidiaries First Mid-Illinois Bank & Trust, N.A., and First Mid Insurance Group. It operates banking centers and ATMs in over 25 communities in Illinois. More information about First Mid is available at www.firstmid.com.

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