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):
JULY 26, 2016
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:

[X]	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 report to stockholders issued by First Mid-Illinois Bancshares, Inc. (the "Company") on August 1, 2016, attached as Exhibit 99, providing information concerning the Company's financial statements and operations as of June 30, 2016.

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

On July 26, 2016, John W. Hedges, age 68, informed the Board of Directors of the Company of his intent to resign, effective as of the close of business on December 31, 2016, from his positions as Senior Executive Vice President of the Company and Chief Credit Officer of the Company’s wholly owned banking subsidiary, First Mid-Illinois Bank & Trust, N.A. (“First Mid Bank”). The Company and Mr. Hedges intend that Mr. Hedges will serve as a consultant to the Company beginning on January 1, 2017.

Effective January 1, 2017, following the retirement of Mr. Hedges, Eric S. McRae will assume the position of Chief Credit Officer of First Mid Bank.  Mr. McRae, age 51, has been Executive Vice President of the Company and Executive Vice President, Senior Lender of First Mid Bank since December 2008 and will retain his roles as Executive Vice President of the Company and Executive Vice President of the Bank upon assuming the position of Chief Credit Officer of the Bank.  He served as First Mid Bank’s Decatur Regional President from 2001 to December 2008.

Mr. McRae has an extension of credit from First Mid Bank. Such extension of credit was made in the ordinary course of business, on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with persons not related to First Mid Bank, and did not involve more than the normal risk of collectability or present other unfavorable features.

Item 9.01.     Financial Statements and Exhibits.

(d)  Exhibits

Exhibit 99     Quarterly Report to Stockholders as of and for the period ending June 30, 2016

Safe Harbor

This document may contain certain forward-looking statements, such as discussions of the Company’s pricing and fee trends, credit quality and outlook, liquidity, new business results, expansion plans, anticipated expenses and planned schedules. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1955. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of the Company and First Clover Leaf, are identified by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,” or similar expressions. Actual results could differ materially from the results indicated by these statements because the realization of those results is subject to many risks and uncertainties, including, among other things, the possibility that any of the anticipated benefits of the proposed transactions between the Company and First Clover Leaf will not be realized or will not be realized within the expected time period; the risk that integration of the operations of First Clover Leaf with the Company will be materially delayed or will be more costly or difficult than expected; the inability to complete the proposed transactions due to the failure to obtain the required stockholder approvals; the failure to satisfy other conditions to completion of the proposed transactions; the failure of the proposed transactions to close for any other reason; the effect of the announcement of the transaction on customer relationships and operating results; the possibility that the transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events; changes in interest rates; general economic conditions and those in the market areas of the Company and First Clover Leaf; legislative/regulatory changes; monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board; the quality or composition of the Company’s and First Clover Leaf’s loan or investment portfolios and the valuation of those investment portfolios; success in raising capital by the Company; demand for loan products; deposit flows; competition, demand for financial services in the market areas of the Company and First Clover Leaf; and accounting principles, policies and guidelines. Additional information concerning the Company and First Clover Leaf, including additional factors and risks that could materially affect the Company’s and First Clover Leaf’s financial results, are included in the Company’s and First Clover Leaf’s filings with the SEC, including their Annual Reports on Form 10-K. Forward-looking statements speak only as of the date they are made. Except as required under the federal securities laws or the rules and regulations of the SEC, we do not undertake any obligation to update or review any forward-looking information, whether as a result of new information, future events or otherwise.

Proxy Statement/Prospectus

This material is not a substitute for the proxy statement/prospectus that the Company and First Clover Leaf filed with the Securities and Exchange Commission on June 13, 2016, which, as amended, was declared effective on July 29, 2016. Investors in the Company or First Clover Leaf are urged to read the proxy statement/prospectus, which contains important information, including detailed risk factors. The proxy statement/prospectus and other documents which will be filed by the Company and First Clover Leaf with the Securities and Exchange Commission will be available free of charge at the Securities and Exchange Commission’s website, www.sec.gov, or by directing a request to First Mid-Illinois Bancshares, P.O. Box 499, Mattoon, IL 61938, Attention: Secretary; or to First Clover Leaf Financial Corp., P.O. Box 540, Edwardsville, IL 62025, Attention: Secretary. The definitive proxy statement/prospectus will be mailed to the stockholders of each of the Company and First Clover Leaf on or about August 2, 2016.

This communication shall not constitute an offer to sell or the solicitation of an offer to buy securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.

Proxy Solicitation

The Company and First Clover Leaf, and certain of their respective directors, executive officers and other members of management and employees are participants in the solicitation of proxies in connection with the proposed transactions. Information about the directors and executive officers of the Company is set forth in its proxy statement for its 2016 annual meeting of stockholders. Information about the directors and executive officers of First Clover Leaf is set forth in its Form 10-K/A filed with the Securities and Exchange Commission on April 28, 2016. Investors may obtain additional information regarding the interests of such participants in the proposed transactions by reading the definitive proxy statement/prospectus for such proposed transactions.

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: August 1, 2016

Joseph R. Dively

Chairman and Chief Executive Officer

INDEX TO EXHIBITS

Exhibit
Number	Description
99	Quarterly Report to Stockholders

EX-99

Exhibit 99

QUARTERLY REPORT TO STOCKHOLDERS

2016 SECOND QUARTER

First Mid Announces:

▪ Growth in Net Income, Earnings Per Share, and Dividends Per Share

▪ Continued Strong Asset Quality Metrics

▪ Completion of Series C Preferred Stock Conversion

▪ Inclusion in Russell 3000 Index

We completed the first half of 2016 with growth in net income, earnings and dividends per share, asset quality ratios remain quite strong, and we increased tangible book value per share. Net income for the first six months of 2016 increased 19% to $9,735,000 as compared to $8,195,000 for the same period last year. On a per share basis, diluted earnings per share were $.99 for the first six months of 2016 compared to $.97 for the same period in 2015. Based upon the strength of our financial performance, the Board of Directors increased the common stock dividend paid during the first half of 2016 to $.30 per share as compared to $.29 per share for the same period last year. 2016 year-to-date (YTD) net income increased due to greater net interest income with growth in earning assets from the branch acquisition and increases in loan balances from our legacy markets, and greater revenues from insurance, brokerage and electronic services. The 2016 and 2015 financial reports include operating results for 12 Southern Illinois banking centers since acquisition from Old National Bancorp on August 14, 2015 and operating results from the Illiana Insurance Agency since acquisition on December 1, 2015. In addition, 2016 results include $242,000 in acquisition costs related to the pending First Clover Leaf Financial Corp. acquisition.

YTD net interest income totaled $32.1 million compared to $26.0 million for the same period last year. YTD average earning assets were $434 million higher than last year with the Old National branch acquisition and legacy market loan growth. Loan balances increased over the past year with $1.32 billion as of June 30, 2016 compared to $1.28 billion at year-end and $1.06 billion on June 30, 2015. $156 million in loans were acquired with the Old National branch acquisition and we also increased commercial operating and commercial real estate loan balances across our market area with loan balances increasing by $33.3 million thus far in 2016. In addition, investment balances increased over the past year as we added securities to invest the cash received from the Old National branch acquisition. The growth in loans and investments from last June increased the level of earning assets resulting in the increase in net interest income. Our deposit balances also increased from last year moving from $1.27 billion as of June 30, 2015 to $1.70 billion as of June 30, 2016 with $453 million coming from the Old National branch acquisition. Since year-end, deposit balances have declined by $28.4 million primarily due to declines in NOW and money market account balances from seasonal cash fluctuations of a few customers and declines in public fund CDs. We had greater liquidity for most of the first half of 2016 as we deployed the cash from the acquisition. We ended the quarter in a more balanced position with $5.9 million in federal funds sold and interest-bearing balances from banks. The higher liquidity level and pressure on investment yields from intermediate-term interest rates moving lower during the first six months of 2016 reduced the net interest margin. The net interest margin on a tax equivalent basis for the first half of 2016 was 3.37% as compared to 3.50% for the same period last year. The most recent trend had the net interest margin for the second quarter of 3.37% which was the same as the first quarter and higher than the margin of 3.29% for the fourth quarter of 2015.

With the growth in loan balances and a slightly higher level of net charge-offs, provision expense for the first six months of 2016 was $846,000 as compared to $408,000 for the same period last year. During the first six months of 2016, net charge-offs remained low at $258,000 as compared to $159,000 for the same period last year. Our overall level of non-performing loans and other real estate owned to total assets remain very low at .24% but we have seen an increase to $5.1 million as of June 30, 2016 as compared to $4.7 million at year-end and $3.3 million as of June 30, 2015. We also continue to have a strong coverage ratio of the allowance for loan losses to non-performing loans of 328% as of June 30, 2016.

Non-interest income for the first half of 2016 was $13.1 million as compared to $9.3 million for the same period last year. Insurance commissions were $959,000 higher than last year with the revenues from Illiana Insurance Agency which are generally higher in the first half of the year due to timing of policies underwritten and greater income from carriers based upon claims experience. YTD revenues from electronic services were $937,000 greater than last year, deposit service charges increased by $686,000, and brokerage revenues were $330,000 higher than the first six months of last year primarily due to the addition of the Southern Illinois locations.

Operating expenses for the first six months of 2016 were $29.3 million as compared to $22.0 million last year. The operating expenses of the acquired Southern Illinois branch locations and the Illiana Insurance Agency are included for the first six months of 2016 and $242,000 in acquisition costs for the pending acquisition of First Clover Leaf Financial Corp. ("First Clover Leaf") were included. Salaries and benefits expense increased to $15.4 million as compared to $12.4 million for the same period last year as full-time equivalent employees increased to 520 at June 30, 2016 from 410 as of June 30, 2015. Occupancy expenses also increased to $5.5 million from $3.9 million for the first six months of last year with the addition of the 12 branch locations. In 2016, we donated a branch building in Monticello, Illinois and $653,000 is included in donations expense reflecting the net book value deducted for tax purposes.

Our regulatory capital ratios remain strong and in excess of the regulatory minimums to be considered well-capitalized. Two of the four regulatory capital ratios increased from year-end while tier 1 capital to risk-weighted assets and total capital to risk-weighted assets declined slightly as we moved cash into loans and investments that require a higher capital allocation. Our tangible book value per share increased during the first six months of 2016 to $17.01 at June 30, 2016 as compared to $15.09 at year-end and $17.00 as of June 30, 2015 with the retained earnings from net income. We also completed the conversion of $27.4 million of Series C preferred stock to common stock during the second quarter. The conversion led to the increase in the common equity capital ratios.

Also this quarter, First Mid-Illinois Bancshares, Inc. ("First Mid") joined the Russell 3000 Index. Annual reconstitution of the Russell US indexes captures the 4,000 largest US stocks as of the end of May, ranking them by total market capitalization. Membership in the US all-cap Russell 3000^® Index, which remains in place for one year, means automatic inclusion in the large-cap Russell 1000^® Index or small-cap Russell 2000^® Index, as well as the appropriate growth and value style indexes. FTSE Russell determines membership for its Russell indexes by objective, market-capitalization rankings and style attributes. Over the past few years, we have completed several strategic initiatives including listing on NASDAQ and adding institutional investment to give First Mid stock increased exposure to investors and the financial community. These steps have contributed to a significant increase in First Mid shares traded, and the resulting improved liquidity is a positive development for our shareholders. Inclusion in the Russell 3000 is another important step in that initiative.

As mentioned earlier, in April, 2016, First Mid-Illinois Bancshares, Inc. announced entry into an Agreement and Plan of Merger to acquire 100% of the issued and outstanding shares of First Clover Leaf pursuant to a business combination whereby First Clover Leaf will merge with and into the First Mid. The acquisition of First Clover Leaf would expand our presence in the St. Louis metro east market area and provides a banking location outside the State of Illinois in Clayton, Missouri. We are excited both about the market expansion and the high quality team that will become part of First Mid at close. We are working to meet the conditions for the acquisition, and the merger will require approval of the stockholders of both First Mid and First Clover Leaf. We anticipate the merger to be completed in the second half of 2016.

In conclusion, I am pleased to start the year with solid financial results and very excited about the opportunity to expand our company. Thank you for your continued support of First Mid-Illinois Bancshares, Inc. and please contact me if you should have any questions.

Sincerely,

Joseph R. Dively

Chairman and Chief Executive Officer

217-258-9520

jdively@firstmid.com

August 1, 2016

Second Quarter 2016 Financial Results
FIRST MID-ILLINOIS BANCSHARES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)	(unaudited)						(unaudited)
	June 30,			December 31,			June 30,
	2016			2015			2015
Assets
Cash and cash equivalents	$	53,072		$	115,784		$	46,334
Investment securities	643,045			629,056			465,896
Loans (including loans held for sale)	1,315,187			1,281,889			1,059,103
Less allowance for loan losses	(15,164		)	(14,576		)	(13,931		)
Net loans	1,300,023			1,267,313			1,045,172
Premises and equipment, net	29,569			31,340			27,208
Goodwill and intangibles, net	49,147			50,004			27,286
Bank Owned Life Insurance	25,183			—			—
Other assets	19,744			21,002			22,224
Total assets	$	2,119,783		$	2,114,499		$	1,634,120
Liabilities and Stockholders’ Equity
Deposits:
Non-interest bearing	$	340,576		$	342,636		$	226,229
Interest bearing	1,363,623			1,389,932			1,039,970
Total deposits	1,704,199			1,732,568			1,266,199
Repurchase agreements with customers	131,099			128,842			117,468
Other borrowings	40,000			20,000			25,000
Junior subordinated debentures	20,620			20,620			20,620
Other liabilities	7,245			7,460			6,938
Total liabilities	1,903,163			1,909,490			1,436,225
Total stockholders’ equity	216,620			205,009			197,895
Total liabilities and stockholders’ equity	$	2,119,783		$	2,114,499		$	1,634,120

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands) (unaudited)	Six months ended
	June 30,
	2016			2015
Balance at beginning of period	$	205,009		$	164,916
Net income	9,735			8,195
Dividends on preferred stock and common stock	(3,769		)	(3,130		)
Issuance of preferred and common stock	882			28,739
Purchase of treasury stock	—			(962		)
Deferred compensation and other adjustments	224			156
Changes in accumulated other comprehensive income	4,539			(19		)
Balance at end of period	$	216,620		$	197,895

Second Quarter 2016 Financial Results
FIRST MID-ILLINOIS BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data) (unaudited)
	Three months ended				Six months ended
	June 30,				June 30,
	2016		2015		2016		2015
Interest income:
Interest and fees on loans	$	13,610	$	11,724	$	27,202	$	22,776
Interest on investment securities	3,172		2,430		6,393		4,791
Interest on federal funds sold & other deposits	101		18		267		44
Total interest income	16,883		14,172		33,862		27,611
Interest expense:
Interest on deposits	575		513		1,154		1,045
Interest on repurchase agreements with customers	21		15		39		29
Interest on other borrowings	168		170		318		323
Interest on subordinated debt	149		130		294		258
Total interest expense	913		828		1,805		1,655
Net interest income	15,970		13,344		32,057		25,956
Provision for loan losses	733		143		846		408
Net interest income after provision for loan losses	15,237		13,201		31,211		25,548
Non-interest income:
Trust revenues	794		860		1,775		1,780
Brokerage commissions	466		306		914		584
Insurance commissions	735		474		2,068		1,109
Service charges	1,644		1,278		3,153		2,467
Securities gains, net	404		1		664		230
Mortgage banking revenues	238		210		333		377
ATM / debit card revenue	1,472		1,018		2,961		2,024
Other	706		390		1,235		765
Total non-interest income	6,459		4,537		13,103		9,336
Non-interest expense:
Salaries and employee benefits	7,602		6,297		15,449		12,353
Net occupancy and equipment expense	2,646		1,926		5,525		3,905
Amortization of intangible assets	402		156		857		311
Legal and professional expense	917		600		1,701		1,182
Other	2,576		2,251		5,782		4,283
Total non-interest expense	14,143		11,230		29,314		22,034
Income before income taxes	7,553		6,508		15,000		12,850
Income taxes	2,624		2,352		5,265		4,655
Net income	$	4,929	$	4,156	$	9,735	$	8,195
Per Share Information
Basic earnings per common share	$	0.51	$	0.50	$	1.01	$	1.00
Diluted earnings per common share	0.50		0.49		0.99		0.97
Dividends per common share	0.30		0.29		0.30		0.29

Second Quarter 2016 Financial Results
FIRST MID-ILLINOIS BANCSHARES, INC.
SELECTED FINANCIAL HIGHLIGHTS	As of
	(unaudited)				(unaudited)
	June 30,		December 31,		June 30,
	2016		2015		2015
SHARE AND PER COMMON SHARE DATA
Book value per common share	$22.01		$21.01		$20.24
Tangible book value per common share	$17.01		$15.09		$17.00
Common shares outstanding	9,843,652		8,453,967		8,422,018
Market price of stock	$25.00		$26.00		$21.95
REGULATORY CAPITAL RATIOS
Leverage ratio	9.44	%	9.20	%	12.49	%
Total capital to risk-weighted assets	14.11	%	14.25	%	18.31	%
Tier 1 capital to risk-weighted assets	13.09	%	13.23	%	17.13	%
Common equity tier 1 capital to risk weighted assets	11.76	%	9.92	%	13.10	%
Preferred stockholders' equity	$0		$27,400,000		$27,400,000
Common stockholders' equity	$216,620,000		$177,609,000		$170,495,000
ASSET QUALITY
Allowance for loan losses to non-performing loans	328	%	363	%	454	%
Allowance for loan losses to total loans outstanding	1.15	%	1.14	%	1.32	%
Total YTD net charge-offs (1)	$258,000		$424,000		$159,000
Total non-performing loans and other real estate owned	$5,112,000		$4,491,000		$3,347,000

	Three months ended (unaudited)						Six months ended (unaudited)
	June 30,		March 31,		June 30,		June 30,		June 30,
	2016		2016		2015		2016		2015
PERFORMANCE RATIOS (1)
Return on average assets (2)	0.93	%	0.91	%	1.02	%	0.92	%	1.01	%
Return on average common equity (2)	9.44	%	9.35	%	9.79	%	9.76	%	9.89	%
Net interest margin (3)	3.37	%	3.37	%	3.57	%	3.37	%	3.50	%

(1) Financial information is provided as of the date listed except Performance Ratios and Total Net charge-offs which are as of the period ending on the date listed

(2) Annualized net income for period

(3) On a tax equivalent basis (TE), assuming a federal income tax rate of 35%

Corporate Profile

First Mid-Illinois Bancshares, Inc. is the parent company of First Mid-Illinois Bank & Trust, N.A. ("First Mid Bank"), Mid-Illinois Data Services, Inc., and First Mid Insurance Group. Our mission is to fulfill the financial needs of our communities with exceptional personal service, professionalism and integrity, and deliver meaningful value and results for customers and shareholders.

First Mid Bank was first chartered in 1865 and has since grown into a more than $2.1 billion community-focused organization that provides financial services through a network of 46 banking centers in 33 communities. Our talented team is comprised of over 500 men and women who take great pride in First Mid Bank and the Company, their work and their ability to serve our customers.

More information about the Company is available on our website at www.firstmid.com. Our stock is traded in The NASDAQ Stock Market LLC under the ticker symbol "FMBH."

Note Concerning Forward-looking Statements

This presentation may contain certain forward-looking statements, such as discussions of the Company's pricing and fee trends, credit quality and outlook, liquidity, new business results, expansion plans, anticipated expenses and planned schedules. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1955. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of the Company, are identified by use of the words "believe," "expect," "intend," "anticipate," "estimate," "project," or similar expressions. Actual results could differ materially from the results indicated by these statements because the realization of those results is subject to many risks and uncertainties, including those described in Item 1A - "Risk Factors" and other sections of the Company's Annual Report on Form 10-K, and the Company's other filings with the SEC. Furthermore, forward-looking statements speak only as of the date they are made. Except as required under the federal securities laws or the rules and regulations of the SEC, we do not undertake any obligation to update or review any forward-looking information, whether as a result of new information, future events or otherwise.

First Mid-Illinois Bancshares, Inc.

1421 Charleston Avenue

Mattoon, Illinois 61938

217-234-7454

www.firstmid.com