Business Context and Reporting Period
Company: First Mid-Illinois Bancshares, Inc.
Filing Type: Form 10-K (Annual Report)
Period Ended: December 31, 2001
Business Overview: The Company is a financial holding company operating primarily through its wholly-owned subsidiary, First Mid-Illinois Bank & Trust, N.A. It provides commercial, agricultural, and consumer banking services, trust services, and insurance products in east central Illinois. The Company also owns Mid-Illinois Data Services, Inc. and The Checkley Agency, Inc. (acquired January 2002).
Key Financial Metrics
| Metric (in thousands, except per share) | 2001 | 2000 |
|---|---|---|
| Total Assets | $705,979 | $642,999 |
| Total Loans (Net) | $469,541 | $426,026 |
| Total Deposits | $559,420 | $503,985 |
| Net Interest Income | $23,916 | $21,618 |
| Net Income | $6,516 | $5,660 |
| Diluted Earnings Per Share | $1.92 | $1.67 |
| Return on Average Assets | 0.97% | 0.92% |
| Return on Average Equity | 12.14% | 10.55% |
| Net Interest Margin (TE) | 3.99% | 3.97% |
| Allowance for Loan Losses | $3,702 | $3,262 |
| Stockholders' Equity | $63,925 | $57,727 |
Material Changes vs. Prior Period
- Profitability: Net income increased 15.1% to $6.516 million, driven by a $2.3 million increase in net interest income and a $2.0 million increase in other income.
- Acquisitions: On April 20, 2001, the Company acquired American Bank of Illinois in Highland for $3.7 million, adding approximately $30.8 million in deposits and $24.9 million in loans. On January 29, 2002, it acquired The Checkley Agency, Inc.
- Interest Rates: The Federal Funds rate declined from 6.5% (Dec 2000) to 1.75% (Dec 2001). Despite this, the net interest margin improved slightly due to increased loan volumes and lower deposit rates.
- Non-Interest Income: Increased significantly due to a 201.8% rise in mortgage banking income (driven by lower rates and higher volume) and a 20.4% increase in service charges.
- Stock Split: A 3-for-2 stock split was effected on November 16, 2001. All per-share data has been restated.
Guidance, Outlook, Risks, and Contingencies
- Interest Rate Risk: The Company is liability-sensitive on a cumulative basis through the twelve-month horizon. Management estimates that a 100 basis point increase in the prime rate would decrease net interest income by approximately $314,000 (1.12%).
- Legal Proceedings: The Company withdrew a complaint against the U.S. Government regarding supervisory goodwill on March 26, 2002, based on legal counsel's advice. No other material litigation is pending.
- Capital Adequacy: As of December 31, 2001, the Company and its subsidiary bank exceeded all regulatory capital requirements. The risk-based capital ratio was 11.23% (minimum 8%) and the leverage ratio was 7.34% (minimum 4%).
- Accounting Changes: The Company adopted SFAS 142 (Goodwill and Other Intangible Assets) effective January 1, 2002, which will cease amortization of goodwill and require annual impairment testing.
- Liquidity: The Company maintains strong liquidity with $17 million in overnight Federal Fund lines and a $10 million revolving credit facility with The Northern Trust Company ($5.675 million available).
Investor Verification Checklist
- Acquisition Integration: Verify the performance of the American Bank of Illinois acquisition and the impact of the new insurance subsidiary (Checkley Agency) on future revenue streams.
- Interest Rate Sensitivity: Monitor the impact of the liability-sensitive gap position on net interest margin if interest rates rise unexpectedly.
- Asset Quality: Review the allowance for loan losses coverage ratio (102.6% of nonperforming loans) and the concentration of agricultural loans ($82.6 million, or 17.5% of total loans) given regional economic dependencies.
- Stock Repurchases: Confirm the status of the remaining authorized repurchase program (3,098,531 shares authorized as of year-end).
- Regulatory Compliance: Ensure continued compliance with capital covenants on the $4.325 million revolving credit facility with The Northern Trust Company.