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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended
June 30, 2002 Commission
file number: 0-13368


FIRST MID-ILLINOIS BANCSHARES, INC.
(Exact name of Registrant as specified in its charter)


Delaware
(State of incorporation)


37-1103704
(I.R.S. employer identification no.)

1515 Charleston Avenue, Mattoon, Illinois 61938
(Address and zip code of principal executive offices)

(217) 234-7454
(Registrant's telephone number, including area code)


Indicate by check mark whether the Company (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 Company
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]

As of August 13, 2002, 3,395,852 common shares, $4.00 par value, were
outstanding. The outstanding shares have been adjusted to reflect a
three-for-two stock split paid on November 16, 2001. (See Notes to Consolidated
Financial Statements).





PART I
ITEM 1. FINANCIAL STATEMENTS


Consolidated Balance Sheets (unaudited) June 30, December 31,
(In thousands, except share data) 2002 2001
--------- ------------
Assets
Cash and due from banks:
Non-interest bearing $ 17,440 $ 23,471
Interest bearing 336 5,400
Federal funds sold 7,500 4,225
--------- ---------
Cash and cash equivalents 25,276 33,096
Investment securities:
Available-for-sale, at fair value 159,059 160,096
Held-to-maturity, at amortized cost (estimated fair
value of $2,042 and $2,136 at June 30, 2002
and December 31, 2001, respectively) 2,016 2,071
Loans 482,583 473,243
Less allowance for loan losses (3,713) (3,702)
--------- ---------
Net loans 478,870 469,541
Premises and equipment, net 16,353 16,656
Accrued interest receivable 5,745 6,790
Goodwill, net 10,849 11,094
Intangible assets, net 2,969 1,298
Other assets 5,818 5,337
--------- ---------
Total assets $ 706,955 $ 705,979
========= =========
Liabilities and Stockholders' Equity
Deposits:
Non-interest bearing $ 79,998 $ 80,265
Interest bearing 473,871 479,155
--------- ---------
Total deposits 553,869 559,420
Accrued interest payable 1,804 2,370
Securities sold under agreements to repurchase 33,851 38,879
Other borrowings 43,640 37,625
Other liabilities 4,795 3,760
--------- ---------
Total liabilities 637,959 642,054
--------- ---------
Stockholders' Equity:
Common stock, $4 par value; authorized 6,000,000
shares; issued 3,599,934 shares in 2002 and
3,546,060 shares in 2001 14,400 14,184
Additional paid-in-capital 14,362 13,288
Retained earnings 42,649 39,500
Deferred compensation 1,487 1,392
Accumulated other comprehensive income 1,986 740
Less treasury stock at cost, 198,750 shares
in 2002 and 174,216 shares in 2001 (5,888) (5,179)
--------- ---------
--------- ---------

Total stockholders' equity 68,996 63,925
--------- ---------
Total liabilities and stockholders' equity $ 706,955 $ 705,979
========= =========



See accompanying notes to unaudited consolidated financial statements.



Consolidated Statements of Income (unaudited)
(In thousands, except per share data)
Three months ended Six months ended
June 30, June 30,
2002 2001 2002 2001
------- ------- ------- -------
Interest income:
Interest and fees on loans $ 8,402 $ 9,347 $16,821 $18,362
Interest on investment securities 1,872 2,162 3,778 4,383
Interest on federal funds sold 45 53 75 87
Interest on deposits with
other financial institutions 1 1 11 2
------- ------- ------- -------
Total interest income 10,320 11,563 20,685 22,834
------- ------- ------- -------
Interest expense:
Interest on deposits 2,993 4,972 6,374 10,024
Interest on securities sold under agreements
to repurchase 86 251 172 543
Interest on Federal Home Loan Bank advances 480 419 930 823
Interest on federal funds purchased 1 6 2 12
Interest on debt 52 62 85 136
------- ------- ------- -------
Total interest expense 3,612 5,710 7,563 11,538
------- ------- ------- -------
Net interest income 6,708 5,853 13,122 11,296
------- ------- ------- -------
Provision for loan losses 150 150 275 300
------- ------- ------- -------
Net interest income after
provision for loan losses 6,558 5,703 12,847 10,996
------- ------- ------- -------
Other income:
Trust revenues 450 471 928 971
Brokerage commissions 76 65 134 112
Insurance commissions 313 29 504 79
Service charges 780 800 1,517 1,516
Securities gains, net 73 82 116 140
Mortgage banking revenue 360 296 667 474
Other 407 477 897 924
------- ------- ------- -------
Total other income 2,459 2,220 4,763 4,216
------- ------- ------- -------
Other expense:
Salaries and employee benefits 3,096 2,750 6,102 5,302
Net occupancy and equipment expense 1,009 958 1,980 1,909
Amortization of goodwill 122 226 244 436
Amortization of other intangible assets 124 83 234 167
Stationery and supplies 123 181 278 337
Legal and professional 258 253 496 488
Marketing and promotion 150 231 309 389
Other 1,188 930 2,110 1,749
------- ------- ------- -------
Total other expense 6,070 5,612 11,753 10,777
------- ------- ------- -------
Income before income taxes 2,947 2,311 5,857 4,435
Income taxes 985 696 1,930 1,355
------- ------- ------- -------
Net income $ 1,962 $ 1,615 $ 3,927 $ 3,080
======= ======= ======= =======
Per share data:
Basic earnings per share $ .58 $ .48 $ 1.16 $ .91
Diluted earnings per share $ .57 $ .48 $ 1.15 $ .91
======= ======= ======= =======



See accompanying notes to unaudited consolidated financial statements.




Consolidated Statements of Cash Flows (unaudited)
(In thousands) June 30,
2002 2001
-------- --------
Cash flows from operating activities:
Net income $ 3,927 $ 3,080
Adjustments to reconcile net income to
net cash provided by (used in) operating activities:
Provision for loan losses 275 300
Depreciation, amortization and accretion, net 1,751 1,472
Gain on sale of securities, net (116) (140)
Loss on sale of other real property owned, net 16 2
Gain on sale of mortgage loans held for sale, net (512) (381)
Origination of mortgage loans held for sale (37,115) (31,156)
Proceeds from sale of mortgage loans held for sale 39,905 26,600
Decrease in other investment 250 -
(Increase) decrease in other assets (2,060) 1,599
Increase (decrease) in other liabilities 1,630 (529)
-------- --------
Net cash provided by operating activities 7,951 847
-------- --------
Cash flows from investing activities:
Capitalization of mortgage servicing rights (1) (40)
Purchases of premises and equipment (624) (788)
Net increase in loans (11,882) (3,606)
Proceeds from sales of securities available-for-sale 10,646 6,850
Proceeds from maturities of:
Securities available-for-sale 17,476 51,084
Securities held-to-maturity 301 -
Purchases of securities available-for-sale (25,349) (42,367)
Purchases of securities held-to-maturity (84) (299)
Net cash provided by acquisition 15 606
-------- --------
Net cash provided by (used in) investing activities (9,502) 11,440
-------- --------
Cash flows from financing activities:
Net increase (decrease) in deposits (5,551) 6,351
Increase (decrease) in repurchase agreements (5,028) 167
Decrease in short-term FHLB advances -- (15,000)
Increase in long-term FHLB advances 5,000 3,000
Increase in other borrowings 220 -
Proceeds from issuance of common stock 367 173
Purchase of treasury stock (614) (443)
Dividends paid on common stock (663) (590)
-------- --------
Net cash used in financing activities (6,269) (6,342)
-------- --------
Increase (decrease) in cash and cash equivalents (7,820) 5,945
-------- --------
Cash and cash equivalents at beginning of period 33,096 24,840
-------- --------
Cash and cash equivalents at end of period $ 25,276 $ 30,785
======== ========
Additional disclosures of cash flow information

Interest $ 8,129 $ 11,147
Income Taxes 2,052 1,525
Loans transferred to real estate owned 338 40
Dividends reinvested in common stock 925 777
======== ========





Notes to Consolidated Financial Statements
(Unaudited)

Summary of Significant Accounting Policies

Basis of Accounting and Consolidation

The unaudited consolidated financial statements include the accounts of
First Mid-Illinois Bancshares, Inc. ("Company") and its wholly-owned
subsidiaries: Mid-Illinois Data Services, Inc. ("MIDS") and First Mid-Illinois
Bank & Trust, N.A. ("First Mid Bank") and its wholly-owned subsidiary First
Mid-Illinois Insurance Services, Inc. ("First Mid Insurance") and The Checkley
Agency, Inc. ("Checkley"). All significant inter-company balances and
transactions have been eliminated in consolidation. The financial information
reflects all adjustments, which in the opinion of management are necessary for
a fair presentation of the results of the interim periods ended June 30, 2002
and 2001, and all such adjustments are of a normal recurring nature. The results
of the interim period ended June 30, 2002, are not necessarily indicative of the
results expected for the year ending December 31, 2002.

The unaudited consolidated financial statements have been prepared in
accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X
and do not include all of the information required by accounting principles
generally accepted in the United States of America for complete financial
statements and related footnote disclosures. These financial statements should
be read in conjunction with the consolidated financial statements and notes
thereto included in the Company's 2001 Form 10-K.


Stock Split

On November 16, 2001, the Registrant effected a three-for-two stock
split in the form of a 50 percent stock dividend. Par value remained at $4 per
share. The stock split increased the Company's outstanding common shares from
2,250,714 to 3,376,071 shares. All 2001 share and per share amounts have been
restated giving retroactive recognition to the stock split.


Recent Accounting Pronouncements

In June 2001, the FASB issued SFAS No. 141, "Business Combinations,"
("SFAS 141") and SFAS No. 142, "Goodwill and Other Intangible Assets," ("SFAS
142"). SFAS 141 requires that the purchase method of accounting be used for all
business combinations. SFAS 141 also specifies criteria that intangible assets
acquired in a business combination must meet to be recognized and reported
separately from goodwill. SFAS 142 requires that goodwill and intangible assets
with indefinite useful lives no longer be amortized, but instead be tested for
impairment at least annually in accordance with the provisions of SFAS 142. SFAS
142 also requires that intangible assets with finite useful lives be amortized
over their respective estimated useful lives to their estimated residual values,
and reviewed for impairment in accordance with SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets."

The Company adopted the provisions of SFAS 141 as of July 1, 2001, and
SFAS 142 as of January 1, 2002. Goodwill and intangible assets, acquired in
business combinations completed before July 1, 2001, continued to be amortized
and tested for impairment prior to the full adoption of SFAS 142.


Since its adoption of SFAS 142 as of January 1, 2002, the Company was
required to evaluate its existing intangible assets and goodwill that were
acquired in purchase business combinations, and to make any necessary
reclassifications in order to conform with the new classification criteria in
SFAS 141 for recognition separate from goodwill. The Company was also required
to reassess the useful lives and residual values of all intangible assets
acquired, and make any necessary amortization period adjustments by the end of
the first interim period after adoption. If an intangible asset was identified
as having an indefinite useful life, the Company was required to test the
intangible asset for impairment in accordance with the provisions of SFAS 142
within the first interim period. Impairment is measured as the excess of the
carrying value over the fair value of an intangible asset with an indefinite
life. Any impairment loss is measured as of the date of adoption and recognized
as the cumulative effect of a change in accounting principle in the first
interim period.

In connection with the SFAS 142 transitional goodwill impairment
evaluation, SFAS 142 required the Company to perform an assessment of whether
there is an indication that goodwill was impaired as of the date of adoption. To
accomplish this, the Company identified its reporting units and determined the
carrying value of each reporting unit by assigning the assets and liabilities,
including the existing goodwill and intangible assets, to those reporting units
as of January 1, 2002. To the extent the carrying amount of a reporting unit
exceeded the fair value of the reporting unit, an indication would exist that
the reporting unit goodwill might be impaired and the Company would perform the
second step of the transitional impairment test to determine whether a
transitional impairment loss existed. The Company performed the testing of
goodwill for impairment as required by June 30, 2002. The second step was not
required to be completed as the Company determined that its goodwill was not
impaired.

As of January 1, 2002, the date of adoption of SFAS 142, the Company
had unamortized goodwill in the amount of $11.1 million, of which $4 million was
subject to the transition provisions of SFAS 142 and is no longer being
amortized. The remaining $7.1 million is for acquisition of branches whereby the
liabilities assumed were greater than the assets obtained and continues to be
amortized. The Company also had core deposit intangibles of $1.3 million, which
also continue to be amortized. In January 2002, the Company added an additional
$1.9 million of amortizable intangibles as a result of the acquisition of
Checkley. The following table presents gross carrying amount and accumulated
amortization by major intangible asset class as of June 30, 2002 and December
31, 2001 (in thousands):




6/30/02 12/31/01
-------------------------------- --------------------------------
Gross Accumulated Gross Accumulated
Carrying Carrying
Value Amortization Value Amortization
------------- ------------------ -------------- -----------------

Goodwill not subject to amortization $7,054 $3,019 $7,054 $3,019
Goodwill from branch acquisitions 8,755 1,941 8,755 1,696
Core deposit intangibles 2,805 1,661 2,805 1,507
Other intangibles 1,904 79 - -
------------- ------------------ -------------- -----------------
$20,518 $6,700 $18,614 6,222
============= ================== ============== =================



Aggregate amortization for the current year and estimated amortization
expense for each of the five succeeding years is shown in the table below (in
thousands).


Aggregate amortization expense:
For period ended 6/30/02 $478

Estimated amortization expense:
For the period 7/1/02-12/31/02 $485
For year ended 12/31/03 $960
For year ended 12/31/04 $859
For year ended 12/31/05 $840
For year ended 12/31/06 $840
For year ended 12/31/07 $786


The adoption of SFAS 142 resulted in a net income increase of $206,000
or $.06 in basic and diluted earnings per share for the six months ended June
30, 2002. For the six months ended June 30, 2002, amortization expense related
to core deposit intangibles was $155,000, amortization expense related to other
intangibles was $79,000 and amortization expense related to goodwill from branch
acquisitions was $244,000. For the six months ended June 30, 2001, amortization
expense related to goodwill no longer amortizable due to adoption of SFAS 142
was $192,000, amortization expense related to core deposit intangibles was
$167,000 and amortization expense related to goodwill from branch acquisitions
was $244,000.


Comprehensive Income

The Company's comprehensive income for the three and six month periods
ended June 30, 2002 and 2001 is as follows:

Three months ended Six months ended
June 30, June 30,
------------------ ------------------
(In thousands) 2002 2001 2002 2001
------- ------- ------- -------
Net income $ 1,962 $ 1,615 $ 3,927 $ 3,080
------- ------- ------- -------
Other comprehensive income:
Unrealized gain during the period 2,191 381 2,149 2,290
Less realized gain during the period (73) (82) (116) (140)
Tax effect (821) (116) (788) (833)
------- ------- ------- -------
Comprehensive income $ 3,259 $ 1,798 $ 5,172 $ 4,397
======= ======= ======= =======


Earnings Per Share

A three-for-two common stock split was effected on November 16, 2001,
in the form of a distribution of a 50% stock dividend for the stockholders of
record at the close of business on October 26, 2001. Accordingly, information
with respect to shares of common stock and earnings per share has been restated
for 2001 periods presented to fully reflect the stock split. Income for basic
earnings per share is based on the weighted average number of common shares
outstanding. Diluted EPS is computed using the weighted average number of common
shares outstanding, increased by the assumed conversion of the Company's stock
options, unless anti-dilutive. The components of basic and diluted earnings per
common share for the three and six month periods ended June 30, 2002 and 2001
are as follows:








Three months ended Six months ended
June 30, June 30,
----------------------- -----------------------
2002 2001 2002 2001
---------- ---------- ---------- ----------

Basic Earnings per Share:
Net income $1,962,000 $1,615,000 $3,927,000 $3,080,000
Weighted average common shares outstanding 3,385,886 3,373,296 3,385,255 3,375,320
========== ========== ========== ==========
Basic earnings per common share $ .58 $ .48 $ 1.16 $ .91
========== ========== ========== ==========
Diluted Earnings per Share:
Weighted average common shares outstanding 3,385,886 3,373,296 3,385,255 3,375,320
Assumed conversion of stock options 25,997 9,131 22,095 9,172
---------- ---------- ---------- ----------
Diluted weighted average common
shares outstanding 3,413,415 3,382,427 3,408,684 3,384,492
========== ========== ========== ==========
Diluted earnings per common share $ .57 $ .48 $ 1.15 $ .91
========== ========== ========== ==========


Merger and Acquisition

On April 20, 2001, First Mid Bank acquired all of the outstanding stock
of American Bank of Illinois located in Highland, Illinois, for $3.7 million in
cash. This acquisition added approximately $30.8 million to total deposits,
$24.9 million to loans, $2 million to securities, $1.7 million to premises and
equipment and $1.4 million to intangible assets. The acquisition was accounted
for using the purchase method of accounting whereby the acquired assets and
liabilities were recorded at fair value as of the acquisition date and the
excess cost over fair value of net assets was recorded as goodwill. The
consolidated financial statements include the results of operations of American
Bank of Illinois since the acquisition date.

On January 29, 2002, the Company acquired all of the issued and
outstanding stock of Checkley, an insurance agency headquartered in Mattoon,
Illinois. Checkley was purchased for cash with a portion ($750,000) paid at
closing and the remainder ($1,000,000) to be paid over a five-year earn-out
agreement ending January 2007. Checkley operates as a separate subsidiary of the
Company and provides customers with commercial property, casualty, life, auto
and home insurance. In order to facilitate this acquisition, the Company became
a financial holding company under the Gramm-Leach-Bliley Act on December 14,
2001. The results of Checkley's operations are included in the consolidated
financial statements since the acquisition date.

The following table summarizes the estimated fair value of the assets
acquired and liabilities assumed at the date of acquisition (in thousands):

At January 29, 2002:
- ----------------------------------------------------------
Current assets $643
Property and equipment 76
Intangible assets 1,904
---------------------
Total assets acquired 2,623
---------------------
Current liabilities (771)
Debt (20)
---------------------
Total liabilities (791)
---------------------
Net assets acquired $1,832
=====================


The Company estimates that $1,904,000 of acquired intangible assets
were obtained. The identifiable intangible assets were allocated to customer
lists to be amortized over a period of ten years.



ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following discussion and analysis is intended to provide a better
understanding of the consolidated financial condition and results of operations
of the Company and its subsidiaries as of, and for the periods ended, June 30,
2002 and 2001. This discussion and analysis should be read in conjunction with
the consolidated financial statements, related notes and selected financial data
appearing elsewhere in this report.

Forward-Looking Statements

This report contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, 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 1995, and is including this statement for
purposes of these safe harbor provisions. 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
uncertainties including: changes in interest rates, general economic conditions,
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 loan or investment portfolios, demand
for loan products, deposit flows, competition, demand for financial services in
the Company's market area and accounting principles, policies and guidelines.
These risks and uncertainties should be considered in evaluating forward-looking
statements and undue reliance should not be placed on such statements. Further
information concerning the Company and its business, including additional
factors that could materially affect the Company's financial results, is
included in the Company's filings with the Securities and Exchange Commission.

Overview

Net income for the three months ended June 30, 2002 was $1,962,000
($.57 diluted EPS), an increase of $347,000 from $1,615,000 ($.48 diluted EPS)
for the same period in 2001. Net income for the six months ended June 30, 2002
was $3,927,000 ($1.15 diluted EPS), an increase of $847,000 from $3,080,000
($.91 diluted EPS) for the same period in 2001. The adoption of SFAS 142
resulted in a net income increase of $103,000 or $.03 in basic and diluted
earnings per share for the three months ended June 30, 2002. For the six months
ended June 30, 2002, net income increased $206,000 or $.06 in basic and diluted
earnings per share.

A summary of the factors that contributed to the changes in net income
is shown in the table below.
2002 vs. 2001
Three months Six months
(In thousands) Ended June 30 Ended June 30
--------------- ---------------
Net interest income $ 855 $1,851
Other income, including securities transactions 239 547
Other expenses (458) (976)
Income taxes (289) (575)
--------------- ---------------
Increase in net income $ 347 $ 847
=============== ===============

The following table shows the Company's annualized performance ratios
for the three months ended June 30, 2002 and 2001, as compared to the
performance ratios for the year ended December 31, 2001:

June 30, June 30, December 31,
2002 2001 2001
-------- -------- ------------
Return on average assets 1.12% .95% .97%
Return on average equity 11.77% 10.28% 10.56%
Average equity to average assets 9.54% 9.26% 9.20%



Results of Operations

Net Interest Income

The largest source of operating revenue for the Company is net interest
income. Net interest income represents the difference between total interest
income earned on earning assets and total interest expense paid on
interest-bearing liabilities. The amount of interest income is dependent upon
many factors, including the volume and mix of earning assets, the general level
of interest rates and the dynamics of changes in interest rates. The cost of
funds necessary to support earning assets varies with the volume and mix of
interest-bearing liabilities and the rates paid to attract and retain such
funds.

For purposes of the following discussion and analysis, the interest
earned on tax-exempt securities is adjusted to an amount comparable to interest
subject to normal income taxes. The adjustment is referred to as the
tax-equivalent adjustment. The Company's average balances, interest income and
expense and rates earned or paid for major balance sheet categories are set
forth in the following table (dollars in thousands):








Six Months Ended Six Months Ended
June 30, 2002 June 30, 2001
--------------------------------------------------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
--------------------------------------------------------------------------

ASSETS
Interest-bearing deposits $ 1,448 $ 11 1.52% $ 56 $ 2 5.60%
Federal funds sold 9,401 75 1.60% 3,647 87 4.79%
Investment securities
Taxable 132,606 3,107 4.69% 121,576 3,682 6.06%
Tax-exempt (1) 28,957 1,017 7.02% 30,574 1,061 6.94%
Loans (2)(3) 471,736 16,821 7.13% 440,350 18,362 8.34%
--------------------------------------------------------------------------
Total earning assets 644,148 21,031 6.53% 596,203 23,194 7.78%
--------------------------------------------------------------------------

Cash and due from banks 18,442 16,253
Premises and equipment 16,544 15,937
Other assets 25,035 22,340
Allowance for loan losses (3,763) (3,513)
-------------- --------------
Total assets $700,406 $647,220

LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing deposits
Demand deposits $192,912 $ 1,333 1.38% $167,016 $ 2,364 2.83%
Savings deposits 50,203 404 1.61% 39,379 452 2.30%
Time deposits 234,412 4,637 3.96% 252,006 7,208 5.72%
Securities sold under
agreements to repurchase 32,094 172 1.07% 25,673 543 4.23%
FHLB advances 36,546 930 5.09% 28,364 823 5.81%
Federal funds purchased 156 2 2.56% 454 12 5.17%
Other debt 5,196 85 3.27% 4,325 136 6.28%
--------------------------------------------------------------------------
Total interest-bearing
liabilities 551,519 7,563 2.74% 517,217 11,538 4.46%
--------------------------------------------------------------------------
75,269 64,469
Other liabilities 6,877 5,632
Stockholders' equity 66,741 59,902
-------------- --------------
Total liabilities & equity $700,406 $647,220
============== ==============
Net interest income (TE) $13,468 $11,656
============ ===========
Net interest spread 3.79% 3.32%
Impact of non-interest
bearing funds .39% .59%
Net yield on interest- ------------ -------------
earning assets (TE) 4.18% 3.91%
============ =============




(1) Interest income and rates are presented on a tax-equivalent basis ("TE")
assuming a federal income tax rate of 34%.
(2) Loan fees are included in interest income and are not material.
(3) Nonaccrual loans are not material and have been included in the average
balances.

Changes in net interest income may also be analyzed by segregating the
volume and rate components of interest income and interest expense. The
following table summarizes the approximate relative contribution of changes in
average volume and interest rates to changes in net interest income (TE) for the
six months ended June 30, 2002, as compared to the same period in 2001 (in
thousands):

For the six months ended June 30,
2002 compared to 2001
Increase / (Decrease)
---------- ---------- --------- ----------
Total Rate/
Change Volume Rate Volume (4)
Earning Assets:
Interest-bearing deposits $ 9 $ 39 $ (1) $ (29)
Federal funds sold (12) 138 (58) (92)
Investment securities:
Taxable (575) 334 (833) (76)
Tax-exempt (1) (44) (56) 13 (1)
Loans (2)(3) (1,541) 1,309 (2,664) (186)
---------- ---------- --------- ----------
Total interest income (2,163) 1,764 (3,543) (384)
---------- ---------- --------- ----------

Interest-Bearing Liabilities:
Interest-bearing deposits
Demand deposits (1,031) 366 (1,211) (186)
Savings deposits (48) 124 (136) (36)
Time deposits (2,571) (503) (2,218) 150
Securities sold under
agreements to repurchase (371) 136 (406) (101)
FHLB advances 107 238 (102) (29)
Federal funds purchased (10) (8) (6) 4
Long-term debt (51) 27 (65) (13)
Total interest expense (3,975) 380 (4,144) (211)
---------- ---------- --------- ----------
Net interest income $1,812 $1,384 $ 601 $ (173)
========== ========== ========= ==========

(1) Interest income and rates are presented on a tax-equivalent basis,
assuming a federal income tax rate of 34%.
(2) Loan fees are included in interest income and are not material.
(3) Nonaccrual loans are not material and have been included in the
average balances.
(4) The changes in rate/volume are computed on a consistent basis by
multiplying the change in rates with the change in volume.

On a tax equivalent basis, net interest income increased $1,812,000, or
15.5% to $13,468,000 for the six months ended June 30, 2002, from $11,656,000
for the same period in 2001. The increase in net interest income was primarily
due to a growth in net interest earning assets and an increase in net interest
spread.

For the six months ended June 30, 2002, average earning assets
increased by $47,945,000, or 8.0%, and average interest-bearing liabilities
increased $34,302,000, or 6.6%, compared with average balances for the same
period in 2001. Changes in average balances, as a percent of average earnings
assets, are shown below:

< average loans (as a percent of average earnings assets) decreased .7%
to 73.2% for the six months ended June 30, 2002, from 73.9% for the
same period in 2001.

< average securities (as a percent of average earnings assets) decreased
.4% to 25.1% for the six months ended June 30, 2002, from 25.5% for
the same period in 2001.


Provision for Loan Losses

The provision for loan losses for the six months ended June 30, 2002
and 2001 was $275,000 and $300,000, respectively. For information on loan loss
experience and nonperforming loans, see the "Nonperforming Loans" and "Loan
Quality and Allowance for Loan Losses" sections later in this document.

Other Income

An important source of the Company's revenue is derived from other
income. The following table sets forth the major components of other income for
the three months and six months ended June 30, 2002 and 2001 (in thousands):

Three months ended Six months ended
June 30, June 30,
2002 2001 $ Change 2002 2001 $ Change
-------- -------- ---------- ------- -------- ---------
Trust $450 $471 $ (21) $928 $971 $ (43)
Brokerage 76 65 (15) 134 112 22
Insurance commissions 313 29 284 504 79 425
Service charges 780 800 (20) 1,517 1,516 1
Security gains 73 82 (9) 116 140 (24)
Mortgage banking 360 296 64 667 474 193
Other 407 477 (70) 897 924 (27)
-------- -------- ---------- ------- -------- ---------
Total other income $2,459 $2,220 $239 $4,763 $4,216 $ 547
======== ======== ========== ======= ======== =========

Explanations for the three months ended June 30, 2002 as compared to
the same period in 2001:

< Trust revenues decreased $21,000 or 4.5% to $450,000 from $471,000. Trust
assets, reported at market value, were $293 million at June 30, 2002
compared to $298 million at June 30, 2001. Approximately 50% of trust
revenue is market value dependent. The overall decline in equity prices in
the United States has resulted in reduced levels of trust revenue. Absent
an increase in overall equity prices, management does not expect increases
in trust revenue other than that generated through new business.

< Revenues from brokerage increased $11,000 or 16.9% to $76,000 from $65,000
due to an increase in annuity sales.

< Insurance commissions increased $284,000 or 979.3% to $313,000 from
$29,000. This increase is due to the acquisition of Checkley in January
2002.

< Fees from service charges decreased $20,000 or 2.5% to $780,000 from
$800,000. This was primarily the result of higher deposit balances left in
transaction accounts that reduced minimum balance service charge income.

< Sales of investment securities resulted in a net gain of $73,000, as
compared to a net gain of $82,000 for the same quarter in 2001. The net
gain in 2002 resulted from sales of several available-for-sale securities.

< Mortgage banking income increased $64,000 or 21.6% to $360,000 from
$296,000. This increase was due to higher margins received on loans
originated and sold by First Mid Bank. Loans sold balances are as follows:

< $17.0 million (representing 180 loans) for the 2nd quarter 2002.
< $17.9 million (representing 206 loans) for the 2nd quarter 2001.

First Mid Bank generally releases the servicing rights on loans sold
into the secondary market. Accordingly, capitalized originated mortgage
servicing rights are not material to the consolidated financial statements.





< Other income decreased $70,000 or 14.7% to $407,000 from $477,000. This is
primarily the result of lower fees received on late charges.

Explanations for the six months ended June 30, 2002 as compared to the
same period in 2001:

< Trust revenues decreased $43,000 or 4.4% to $928,000 from $971,000. Trust
assets, reported at market value, were $293 million at June 30, 2002 and
$298 million at June 30, 2001. Approximately 50% of trust revenue is market
value dependent. The overall decline in equity prices in the United States
has resulted in reduced levels of trust revenue. Absent an increase in
overall equity prices, management does not expect increases in trust
revenue other than that generated through new business.

< Revenues from brokerage increased $22,000 or 19.6% to $134,000 from
$112,000. This was primarily due to increased annuity sales.

< Insurance commissions increased $425,000 or 538.0% to $504,000 from
$79,000. This increase is due to the acquisition of Checkley in January
2002.

< Fees from service charges increased $1,000 or .1% to $1,517,000 from
$1,516,000.

< Sales of investment securities resulted in a net gain of $116,000 as
compared to $140,000 for the same period in 2001. Each period had sales of
several securities in the available-for-sale portfolio to improve the
overall portfolio mix and the margin.

< Mortgage banking income increased $193,000 or 40.7% to $667,000 from
$474,000. This increase was due to a higher number of fixed rate loans
originated and sold by First Mid Bank as a result of lower interest rates.
Loans sold balances are as follows:

< $39.4 million (representing 435 loans) for the 6 months in 2002.
< $26.2 million (representing 303 loans) for the 6 months in 2001.

< Other income decreased $27,000 or 2.9% to $897,000 from $924,000

Other Expense

The major categories of other expense include salaries and employee
benefits, occupancy and equipment expenses and other operating expenses
associated with day-to-day operations. The following table sets forth the major
components of other expense for the three months and six months ended June 30,
2002 and 2001 (in thousands):



Three months ended Six months ended
June 30, June 30,
2002 2001 $ Change 2002 2001 $ Change
-------- -------- --------- -------- --------- ---------

Salaries and benefits $ 3,096 $ 2,750 $ 346 $ 6,102 $ 5,302 $ 800
Occupancy and equipment 1,009 958 51 1,980 1,909 71
Amortization of goodwill 122 226 (104) 244 436 (192)
Amortization of intangibles 124 83 41 234 167 67
Stationery and supplies 123 181 (58) 278 337 (59)
Legal and professional fees 258 253 5 496 488 8
Marketing and promotion 150 231 (81) 309 389 (80)
Other operating expenses 1,188 930 258 2,110 1,749 361
-------- -------- --------- -------- --------- ---------
Total other expense $ 6,070 $ 5,612 $ 458 $11,753 $10,777 $ 976
======== ======== ========= ======== ========= =========


Explanations for the three months ended June 30, 2002 as compared to
the same period in 2001:

< Salaries and employee benefits, the largest component of other expense,
increased $346,000 or 12.6% to $3,096,000 from $2,750,000. This increase
can be explained by merit increases for continuing employees and an
increase in the number of employees due to the acquisition of Checkley in
January 2002. There were 310 full-time equivalent employees at June 30,
2002 compared to 293 at June 30, 2001.

< Occupancy and equipment expense increased $51,000 or 5.3% to $1,009,000
from $958,000. This increase included building maintenance, utilities and
rent expense for Checkley.

< Amortization of goodwill expense decreased due to the adoption of SFAS No.
142, "Goodwill and Other Intangible Assets," effective January 1, 2002.
Goodwill totaling $4 million at January 1, 2002 is no longer being
amortized. However, the Company continues to amortize goodwill for
acquisition of branches whereby the fair value of liabilities assumed were
greater than the assets obtained, which totaled $7.1 million at January 1,
2002. Amortization of other intangibles expense increased $41,000 as a
result of the acquisition of Checkley ($47,000), partially offset by the
reduction of core deposit intangible expense ($6,000).

< Other operating expenses increased $258,000 or 27.7%. This increase is
almost entirely the result of a $249,500 write-off of an investment in a
venture capital fund. During the second quarter, management determined that
the probability of recovery of the investment was remote and, accordingly,
charged off the investment through a direct charge to earnings. The Company
has no other such investments.

< All other categories of operating expenses decreased a net of $134,000 or
20.2% to $531,000 from $665,000. This decrease is due to higher expenses
during the three months ended June 30, 2001 as a result of the acquisition
of American Bank of Illinois in April 2001.

Explanations for the six months ended June 30, 2002 as compared to the
same period in 2001:

< Salaries and employee benefits, the largest component of other expense,
increased $800,000 or 15.1% to $6,102,000 from $5,302,000. This increase
can be explained by merit increases for continuing employees and an
increase in the number of employees due to the acquisition of Checkley in
January 2002 and American Bank of Illinois in April 2001.

< Occupancy and equipment expense increased $71,000 or 3.7% to $1,980,000
from $1,909,000. This increase included building maintenance, utilities and
depreciation expense for all buildings.

< Amortization of goodwill expense decreased due to the adoption of SFAS No.
142, "Goodwill and Other Intangible Assets," effective January 1, 2002.
Goodwill totaling $4 million at January 1, 2002 is no longer being
amortized. However, the Company continues to amortize goodwill for
acquisition of branches whereby the fair value of liabilities assumed were
greater than the assets obtained, which totaled $7.1 million at January 1,
2002. Amortization of other intangibles expense increased $67,000 as a
result of the acquisition of Checkley ($79,000), partially offset by the
reduction of core deposit intangible expense ($12,000).

< Other operating expenses increased $361,000 or 20.6%. This increase is
almost entirely the result of a $249,500 write-off of an investment in a
venture capital fund. During the second quarter, management determined that
the probability of recovery of the investment was remote and, accordingly,
charged off the investment through a direct charge to earnings. The Company
has no other such investments.

< All other categories of operating expenses decreased a net of $131,000 or
10.8% to $1,083,000 from $1,214,000. This decrease is due to higher
expenses in 2001 as a result of the acquisition of American Bank of
Illinois in April 2001.


Income Taxes

Total income tax expense amounted to $1,930,000 (33.0% effective tax
rate) for the six months ended June 30, 2002, compared to $1,355,000 (31.7%
effective tax rate) for the same period in 2001. The increase in the effective
tax rate is due to increased loan interest income, partially offset by a
decrease in interest income from U.S. Treasury securities.


Analysis of Balance Sheets

Loans

The loan portfolio is the largest category of the Company's earning
assets. The following table summarizes the composition of the loan portfolio as
of June 30, 2002 and December 31, 2001 (in thousands):

June 30, December 31,
2002 2001
----------------- --------------
Real estate - residential $121,176 $136,965
Real estate - agricultural 46,321 41,922
Real estate - commercial 166,664 152,986
----------------- --------------
Total real estate - mortgage $334,161 $331,873
Commercial and agricultural 114,842 107,620
Installment 31,832 32,522
Other 1,748 1,228
----------------- --------------
Total loans $482,583 $473,243
================= ==============


At June 30, 2002, the Company had loan concentrations in agricultural
industries of $84.2 million, or 17.5%, of outstanding loans and $82.6 million,
or 17.5%, at December 31, 2001. The Company had no further loan concentrations
in excess of 10% of outstanding loans.

Real estate mortgage loans have averaged approximately 70% of the
Company's total loan portfolio for the past several years. This is the result of
the Company's focus on real estate lending and a historical strong local housing
market. The balance of real estate loans held for sale amounted to $3,293,000
and $5,571,000 as of June 30, 2002 and December 31, 2001, respectively.

The following table presents the balance of loans outstanding as of
June 30, 2002, by maturities (dollars in thousands):


Maturity (1)
----------------------------------------------
Over 1
One year through Over
or less (2) 5 years 5 years Total
----------- ----------- ----------- ----------
Real estate - residential $ 46,765 $ 70,422 $3,989 $121,176
Real estate - agricultural 6,906 32,751 6,664 46,321
Real estate - commercial 47,285 99,982 19,397 166,664
----------- ----------- ----------- ----------
Total real estate - mortgage $100,956 $203,155 $ 30,050 $334,161
Commercial and agricultural 74,276 38,206 2,360 114,842
Installment 17,006 14,826 - 31,832
Other 286 876 586 1,748
----------- ----------- ----------- ----------
Total loans $192,524 $257,063 $ 32,996 $482,583
=========== =========== =========== ==========

(1) Based on scheduled principal repayments.
(2) Includes demand loans, past due loans and overdrafts.

As of June 30, 2002, loans with maturities over one year consisted of
approximately $263,694,000 in fixed rate loans and $26,366,000 in variable rate
loans. The loan maturities noted above are based on the contractual provisions
of the individual loans. Rollovers and borrower requests are handled on a
case-by-case basis.

Nonperforming Loans

Nonperforming loans are defined as: (a) loans accounted for on a
nonaccrual basis; (b) accruing loans contractually past due ninety days or more
as to interest or principal payments; and loans not included in (a) and (b)
above which are defined as "renegotiated loans". The Company's policy is to
cease accrual of interest on all loans that become ninety days past due as to
principal or interest. 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 collection of interest
or principal.

The following table presents information concerning the aggregate
amount of nonperforming loans at June 30, 2002 and December 31, 2001 (in
thousands):

June 30, December 31,
2002 2001
-------------- -------------
Nonaccrual loans $1,942 $3,419
Renegotiated loans which are performing
in accordance with revised terms 203 188
-------------- -------------
Total Nonperforming Loans $2,145 $3,607
============== =============


At June 30, 2002, approximately $645,000 of the nonperforming loans
resulted from collateral dependent loans to two borrowers. Of the $1,477,000
decrease in nonaccrual loans during the six months ended June 30, 2002, $255,000
resulted from loans transferred to other real estate owned. The remaining
$1,222,000 was the net result of loans made current or paid-off and loans put on
nonaccrual status.

Interest income that would have been reported if nonaccrual and
renegotiated loans had been performing totaled $94,000 for the six months ended
June 30, 2002 and $247,000 for the year ended December 31, 2001. Interest income
on these loans that was included in income totaled $9,000 and $16,000 for the
same periods.

Loan Quality and Allowance for Loan Losses

The allowance for loan losses represents management's best estimate of
the reserve necessary to adequately cover probable losses in the loan portfolio.
The provision for loan losses is the charge against current earnings that is
determined by management as the amount needed to maintain an allowance for loan
losses that is adequate but not excessive. In determining the adequacy of the
allowance for loan losses, and therefore the provision to be charged to current
earnings, management relies predominantly on a disciplined credit review and
approval process which extends to the full range of the Company's credit
exposure. The review process is directed by overall lending policy and is
intended to identify, at the earliest possible stage, borrowers who might be
facing financial difficulty. Once identified, the magnitude of exposure to
individual borrowers is quantified in the form of specific allocations of the
allowance for loan losses. Management considers collateral values 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 renegotiated loans and the current economic conditions in the region where
the Company operates. Management considers the allowance for loan losses a
critical accounting policy.

Management recognizes that there are risk factors which are inherent in
the Company's loan portfolio. All financial institutions face risk factors in
their loan portfolios because risk exposure is a function of the business. The
Company's operations (and therefore its loans) are concentrated in east central
Illinois, an area where agriculture is the dominant industry. Accordingly,
lending and other business relationships with agriculture-based businesses are
critical to the Company's success. At June 30, 2002 the Company's loan portfolio
included $84.2 million of loans to borrowers whose businesses are directly
related to agriculture. The balance increased by $1.6 million from $82.6 million
at December 31, 2001. While the Company adheres to sound underwriting practices,
including collateralization of loans, any extended period of low commodity
prices, significantly reduced yields on crops and/or reduced levels of
government assistance to the agricultural industry, could result in an increase
in the level of problem agriculture loans and potentially to loan losses within
the agricultural portfolio.

Analysis of the allowance for loan losses as of June 30, 2002 and 2001,
and of changes in the allowance for the three and six month periods ended June
30, 2002 and 2001, is as follows (dollars in thousands):





Three months ended Six months ended
June 30, June 30,
2002 2001 2002 2001
--------- --------- --------- ---------
Average loans outstanding,
net of unearned income $471,736 $440,350 $471,736 $440,350
Allowance-beginning of period $ 3,751 $ 3,403 $ 3,702 $ 3,262
Balance added through acquisitions - 275 - 275
Charge-offs:
Real estate-mortgage 111 10 142 10
Commercial, financial & agricultural 33 120 58 124
Installment 55 22 88 46
--------- --------- --------- ---------
Total charge-offs 199 152 288 180

Recoveries:
Real estate-mortgage - - - -
Commercial, financial & agricultural 1 5 2 11
Installment 10 12 22 25
--------- --------- --------- ---------
Total recoveries 11 17 24 36
--------- --------- --------- ---------
Net charge-offs 188 135 264 144
--------- --------- --------- ---------
Provision for loan losses 150 150 275 300
--------- --------- --------- ---------
Allowance-end of period $ 3,713 $ 3,693 $ 3,713 $ 3,693
========= ========= ========= =========
Ratio of annualized net charge offs
to average loans .16% .11% .12% .07%
======== ========== ========= =========
Ratio of allowance for loan losses to
loans outstanding (less unearned
interest at end of period) .77% .80% .77% .80%
======== ========== ========= =========
Ratio of allowance for loan losses
to nonperforming loans 173.3% 81.1% 173.3% 81.1%
======== ========== ========= =========


The Company minimizes credit risk by adhering to sound underwriting and
credit review policies. Management and the board of directors of the Company
review these policies at least annually. Senior management is actively involved
in business development efforts and the maintenance and monitoring of credit
underwriting and approval. The loan review system and controls are designed to
identify, monitor and address asset quality problems in an accurate and timely
manner. The board of directors and management review the status of problem loans
and determine the adequacy of the allowance. In addition to internal policies
and controls, regulatory authorities periodically review asset quality and the
overall adequacy of the allowance for loan losses.


Securities

The Company's overall investment objectives are to insulate the
investment portfolio from undue credit risk, maintain adequate liquidity,
insulate capital against changes in market value and control excessive changes
in earnings while optimizing investment performance. The types and maturities of
securities purchased are primarily based on the Company's current and projected
liquidity and interest rate sensitivity positions. The following table sets
forth the amortized cost of the securities as of June 30, 2002 and December 31,
2001 (in thousands):


June 30, December 31,
2002 2001
---------------------- ---------------------
% of % of
Amount Total Amount Total
---------------------- ---------------------
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 63,512 40% $ 60,852 38%
Obligations of states and
political subdivisions 27,695 18% 29,211 18%
Mortgage-backed securities 49,539 31% 54,306 34%
Other securities 17,088 11% 16,591 10%
----------- ---------- ----------- ----------
Total securities $157,834 100% $160,960 100%
=========== ========== =========== ==========



At June 30, 2002, the Company's investment portfolio showed an increase
in other securities and in mortgage-backed securities with a decrease in U.S.
Treasury securities and obligations of U.S. government corporations and
agencies. All other types of securities remained consistent. The amortized cost,
gross unrealized gains and losses and estimated fair values for
available-for-sale and held-to-maturity securities by major security type at
June 30, 2002 and December 31, 2001 were as follows (in thousands):





Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ------------ ----------------------

June 30, 2002
Available-for-sale:
U.S. Treasury securities and obligations
of U.S. government corporations & agencies $ 63,512 $1,304 $ (56) $ 64,760
Obligations of states and political
subdivisions 25,679 934 (2) 26,611
Mortgage-backed securities 49,539 961 - 50,500
Federal Home Loan Bank stock 3,186 - - 3,186
Other securities 13,902 308 (208) 14,002
----------- ------------ ------------ ---------
Total available-for-sale $155,818 $ 3,507 $ (266) $159,059
=========== ============ ============ =========

Held-to-maturity:
Obligations of states and political
subdivisions $ 2,016 $ 32 $ (6) $ 2,042






Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ----------- ----------------------

December 31, 2001
Available-for-sale:
U.S. Treasury securities and obligations
of U.S. government corporations & agencies $ 60,852 $ 1,165 $(181) $ 61,836
Obligations of states and political
subdivisions 27,140 247 (212) 27,175
Mortgage-backed securities 54,306 427 (242) 54,491
Federal Home Loan Bank stock 3,102 - - 3,102
Other securities 13,489 23 (20) 13,492
----------- ----------- ------------ ---------
Total available-for-sale $158,889 $ 1,862 $(655) $160,096
=========== =========== ============ =========

Held-to-maturity:
Obligations of states and political
subdivisions $ 2,071 $ 70 $ (5) $ 2,136
=========== ============ ============ =========



The following table indicates the expected maturities of investment
securities classified as available-for-sale and held-to-maturity, presented at
amortized cost, at June 30, 2002 and the weighted average yield for each range
of maturities. Mortgage-backed securities are aged according to their weighted
average life. All other securities are shown at their contractual maturity.





One After 1 After 5 After
year through through ten
(In thousands) or less 5 years 10 years years Total
---------- --------- ---------- --------- ---------

Available-for-sale:
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ - $ 61,207 $ 1,500 $ 805 $ 63,512
Obligations of state and
political subdivisions - 6,250 11,641 7,788 25,679
Mortgage-backed securities 755 46,793 1,991 - 49,539
Federal Home Loan Bank stock - - - 3,186 3,186
Other securities - - - 13,902 13,902
---------- --------- ---------- --------- ---------
Total Investments $755 $114,250 $15,132 $25,681 $155,818
========== ========= ========== ========= =========
Weighted average yield 4.12% 4.54% 4.75% 5.83% 4.74%
Full tax-equivalent yield 4.12% 4.64% 6.25% 6.61% 5.08%
========== ========= ========== ========= =========
Held-to-maturity:
Obligations of state and
political subdivisions $ 135 $ 735 $ 530 $ 616 $ 2,016
========== ========= ========== ========= =========
Weighted average yield 5.03% 5.34% 5.55% 5.43% 5.40%
Full tax-equivalent yield 7.27% 7.74% 8.05% 7.87% 7.83%
========== ========= ========== ========= =========


The weighted average yields are calculated on the basis of the
amortized cost and effective yields weighted for the scheduled maturity of each
security. Tax-equivalent yields have been calculated using a 34% tax rate. With
the exception of obligations of the U.S. Treasury and other U.S. Government
agencies and corporations, there were no investment securities of any single
issuer the book value of which exceeded 10% of stockholders' equity at June 30,
2002.

Investment securities carried at approximately $131,445,000 and
$133,208,000 at June 30, 2002 and December 31, 2001, respectively, were pledged
to secure public deposits and repurchase agreements and for other purposes as
permitted or required by law.


Deposits

Funding of the Company's earning assets is substantially provided by a
combination of consumer, commercial and public fund deposits. The Company
continues to focus its strategies and emphasis on retail core deposits, the
major component of funding sources. The following table sets forth the average
deposits and weighted average rates for the six months ended June 30, 2002 and
for the year ended December 31, 2001 (dollars in thousands):



June 30, December 31,
2002 2001
-------------------------------------------
Weighted Weighted
Average Average
Amount Rate Amount Rate
-------------------------------------------
Demand deposits:
Non-interest bearing $ 75,269 - $ 69,020 -
Interest bearing 192,912 1.38% 182,404 2.40%
Savings 50,203 1.61% 41,437 2.23%
Time deposits 234,412 3.96% 247,348 5.45%
-------------------------------------------
Total average deposits $552,796 2.31% $540,209 3.48%
===========================================


The following table sets forth the maturity of time deposits of
$100,000 or more at June 30, 2002 and December 31, 2001 (in thousands):



June 30, December 31,
2002 2001
--------------------------------------
3 months or less $ 28,758 $ 25,503
Over 3 through 6 months 19,772 20,228
Over 6 through 12 months 17,764 10,913
Over 12 months 12,938 4,794
--------------------------------------
Total $ 79,232 $ 61,438
======================================







Repurchase Agreements and Other Borrowings

Securities sold under agreements to repurchase are short-term
obligations of First Mid Bank. First Mid Bank collateralizes these obligations
with certain government securities that are direct obligations of the United
States or one of its agencies. First Mid Bank offers these retail repurchase
agreements as a cash management service to its corporate customers. Other
borrowings consist of Federal Home Loan Bank ("FHLB") advances, federal funds
purchased, and loans (short-term or long-term debt) that the Company has
outstanding.

Information relating to securities sold under agreements to repurchase
and other borrowings as of June 30, 2002 and December 31, 2001 is presented
below (in thousands):

June 30, December 31,
2002 2001
------------ -------------
Securities sold under agreements to repurchase $33,851 $38,879
Federal Home Loan Bank advances:
Fixed term - due in one year or less 8,000 -
Fixed term - due after one year 30,300 33,300
Debt:
Loans due in one year or less 4,540 4,325
Loans due after one year 800 -
------------ -------------
Total $77,491 $76,504
============ =============
Average interest rate at end of period 3.16% 3.15%

Maximum Outstanding at any Month-end
Securities sold under agreements to repurchase $39,086 $40,646
Federal Home Loan Bank advances:
Overnight - 12,800

Fixed term - due in one year or less 8,000 5,000
Fixed term - due after one year 30,300 28,300
Federal funds purchased - 2,850
Debt:
Loans due in one year or less 4,564 4,325
Loans due after one year 800 -
------------ -------------
Total $82,750 $93,921
============ =============

Averages for the Period (YTD)
Securities sold under agreements to repurchase $32,094 $29,547
Federal Home Loan Bank advances:
Overnight 594 2,161
Fixed term - due in one year or less 5,652 3,356
Fixed term - due after one year 30,300 23,349
Federal funds purchased 156 236
Debt:
Loans due in one year or less 4,520 4,325
Loans due after one year 676 -
------------ -------------
Total $73,992 $62,974
============ =============

Average interest rate during the period 3.21% 4.47%


FHLB advances represent borrowings by First Mid Bank to economically
fund loan demand. The fixed term advances consists of $38.3 million as follows:


< $3 million advance at 6.58% with a 2-year maturity, due 10/10/02
< $5 million advance at 2.54% with a 1-year maturity, due 02/28/03
< $5 million advance at 3.45% with a 2-year maturity, due 02/28/04
< $5 million advance at 6.16% with a 5-year maturity, due 03/20/05
< $2.3 million advance at 6.10% with a 5-year maturity, due 04/07/05
< $5 million advance at 6.12% with a 5-year maturity, due 09/06/05
< $5 million advance at 5.34% with a 5-year maturity, due 12/14/05
< $3 million advance at 5.98% with a 10-year maturity, due 03/01/11
< $5 million advance at 4.33% with a 10-year maturity, due 11/23/11

Other debt, both short-term and long-term, represents the outstanding
loan balances for the Company. At June 30, 2002, outstanding loan balances
include $4,325,000 on a revolving credit agreement with The Northern Trust
Company with a floating interest rate of 1.25% over the Federal Funds rate (3.0%
as of June 30, 2002) and set to mature November 19, 2002. The balance also
includes a $1 million note payable resulting from the acquisition of Checkley
with an annual interest rate equal to the prime rate listed in the money rate
section of the Wall Street Journal (4.75% as of June 30, 2002) and principal
payable annually over five years, with a final maturity of January 2007. The
balance also includes a $15,000 note payable on an operating loan assumed with
the Checkley acquisition.


Interest Rate Sensitivity

The Company seeks to maximize its net interest margin while maintaining
an acceptable level of interest rate risk. Interest rate risk can be defined as
the amount of forecasted net interest income that may be gained or lost due to
favorable or unfavorable movements in interest rates, a variable over which
management has no control. Interest rate risk, or sensitivity, arises when the
maturity or repricing characteristics of interest bearing assets differ
significantly from the maturity or repricing characteristics of interest bearing
liabilities.

The Company monitors its interest rate sensitivity position to maintain
a balance between rate sensitive assets and rate sensitive liabilities. This
balance serves to limit the adverse effects of changes in interest rates. The
Company's asset/liability management committee oversees the interest rate
sensitivity position and directs the overall allocation of funds.

In the banking industry, a traditional way to measure potential net
interest income exposure to changes in interest rates is through a technique
known as "static GAP" analysis which measures the cumulative differences between
the amounts of assets and liabilities maturing or repricing at various
intervals. By comparing the volumes of interest bearing assets and liabilities
that have contractual maturities and repricing points at various times in the
future, management can gain insight into the amount of interest rate risk
imbedded in the balance sheet.

The following table sets forth the Company's interest rate repricing
gaps for selected maturity periods at June 30, 2002 (in thousands):



Number of Months Until Next Repricing Opportunity

Interest earning assets: 0-1 1-3 3-6 6-12 12+
---------- ---------- ---------- ---------- ----------

Federal funds sold $ 7,836 $ - $ - $ - $ -
Taxable investment securities 3,958 7,462 10,617 - 110,411
Nontaxable investment securities - 207 794 588 27,038
Loans 117,449 27,434 36,289 61,767 239,644
Total $129,243 $ 35,103 $ 47,700 $ 62,355 $377,093
---------- ---------- ---------- ---------- ----------
Interest bearing liabilities:
Savings and N.O.W. accounts 101,729 745 3,137 2,213 78,721
Money market accounts 27,984 546 819 1,552 26,823
Other time deposits 31,172 41,863 45,990 53,179 57,762
Short-term borrowings/debt 33,851 - 7,540 5,000 -
Long-term borrowings/debt - - - - 31,100
---------- ---------- ---------- ---------- ----------
Total $ 194,736 $ 43,154 $ 57,486 $ 61,944 $194,406
---------- ---------- ---------- ---------- ----------
Periodic GAP $ (65,493) $ (8,051) $ (9,786) $ 411 $182,687
---------- ---------- ---------- ---------- ----------
Cumulative GAP $ (65,493) $ (73,544) $(83,330) $(82,919) $ 99,768
========== ========== ========== ========== ==========
GAP as a % of interest earning assets:
Periodic (10.1%) (1.2%) (1.5%) 0.1% 28.0%
Cumulative (10.1%) (11.3%) (12.8%) (12.7%) 15.3%
========== ========== ========== ========== ==========



The static GAP analysis shows that at June 30, 2002, the Company was
liability sensitive, on a cumulative basis, through the twelve-month time
horizon. This indicates that future increases in interest rates, if any, could
have an unfavorable effect on net interest income.

There are several ways the Company measures and manages the exposure to
interest rate sensitivity, static GAP analysis being one. The Company's asset
liability management committee (ALCO) also uses other financial models to
project interest income under various rate scenarios and prepayment/extension
assumptions consistent with the bank's historical experience and with known
industry trends. ALCO meets at least monthly to review the Company's exposure to
interest rate changes as indicated by the various techniques and to make
necessary changes in the composition terms and /or rates of the assets and
liabilities. Based on all information available, management does not believe
that changes in interest rates which might reasonably be expected to occur in
the next twelve months will have a material, adverse effect on the Company's net
interest income.

Capital Resources

At June 30, 2002, the Company's stockholders' equity had increased
$5,071,000 or 7.9% to $68,996,000 from $63,925,000 as of December 31, 2001.
During the first six months of 2002, net income contributed $3,927,000 to equity
before the payment of dividends to common stockholders. The change in net
unrealized gain/loss on available-for-sale investment securities increased
stockholders' equity by $1,246,000, net of tax.


The Company is subject to various regulatory capital requirements
administered by the federal banking agencies. Bank holding companies follow
minimum regulatory requirements established by the Board of Governors of the
Federal Reserve System ("Federal Reserve System"), and First Mid Bank follows
similar minimum regulatory requirements established for national banks by the
Office of the Comptroller of the Currency. Failure to meet minimum capital
requirements can initiate certain mandatory and possibly additional
discretionary action by regulators that, if undertaken, could have a direct
material effect on the Company's financial statements.

Quantitative measures established by each regulatory agency to ensure
capital adequacy require the reporting institutions to maintain 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. All other institutions
are required to maintain a minimum leverage ratio of 4%. Management believes
that, as of June 30, 2002 and December 31, 2001, the Company and First Mid Bank
have met all capital adequacy requirements.

As of June 30, 2002, the most recent notification from the primary
regulator categorized First Mid Bank as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as well capitalized,
minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios must be
maintained as set forth in the table. There are no conditions or events since
that notification that management believes have changed this category.

To Be Well
Capitalized Under
For Capital rompt Corrective
Actual Adequacy Purposes Action Provision
-------- ------- -------- ------- ----------------
Amount Ratio Amount Ratio Amount Ratio
-------- ------- -------- ------- --------- ------
June 30, 2002
Total Capital
(to risk-weighted assets)
Company $56,905 11.37% $40,032 > 8.00% N/A N/A
-
First Mid Bank 57,358 11.56% 39,692 > 8.00% $46,615 >10.00%
- -

Tier 1 Capital
(to risk-weighted assets)
Company 53,192 10.63% 20,016 > 4.00% N/A N/A
-
First Mid Bank 53,645 10.81% 19,846 > 4.00% 29,769 > 6.00%
- -

Tier 1 Capital
(to average assets)
Company 53,192 7.74% 27,493 > 4.00% N/A N/A
-
First Mid Bank 53,645 7.88% 27,235 > 4.00% 34,043 > 5.00%
- -

December 31, 2001
Total Capital
(to risk-weighted assets)
Company $54,498 11.23% $38,810 > 8.00% N/A N/A
-
First Mid Bank 54,139 11.24% 38,521 > 8.00% $48,152 >10.00%
- -

Tier 1 Capital
(to risk-weighted assets)
Company 50,796 10.47% 19,405 > 4.00% N/A N/A
-
First Mid Bank 50,437 10.47% 19,261 > 4.00% 28,891 > 6.00%
- -

Tier 1 Capital
(to average assets)
Company 50,796 7.34% 27,669 > 4.00% N/A N/A
-
First Mid Bank 50,437 7.36% 27,427 > 4.00% 34,284 > 5.00%
- -


Banks and financial holding companies and bank holding companies are
expected to operate at or above the minimum capital requirements. These ratios
are in excess of regulatory minimums and allow the Company to operate without
capital adequacy concerns.

Stock Plans

Participants may purchase Company stock under the following four plans
of the Company's, the Deferred Compensation Plan, the First Retirement and
Savings Plan, the Dividend Reinvestment Plan, and the Stock Incentive Plan. For
more detailed information on these plans, refer to the Company's 2001 Form 10-K.

On August 5, 1998, the Company announced a stock repurchase program of
up to 3% of its common stock. In March 2000, the Board approved the repurchase
of an additional 5% of the Company's common stock. In September 2001, the Board
authorized the repurchase of $3 million of additional shares of the authorized
common stock, bringing the aggregate total to 8% of the Company's common stock
plus $3 million of additional shares. During the period ending June 30, 2002,
the Company repurchased 24,534 shares (.7%) at a total price of $614,000. Since
inception, the Company has repurchased 198,750 shares (5.8%) at a total price of
$5,888,000. As of June 30, 2002, the Company was authorized per all repurchase
programs to purchase an additional 187,413 shares. Treasury stock is further
affected by activity in the Deferred Compensation Plan.

Liquidity

Liquidity represents the ability of the Company and its subsidiaries to
meet all present and future financial obligations arising in the daily
operations of the business. Financial obligations consist of the need for funds
to meet extensions of credit, deposit withdrawals and debt servicing. The
Company's liquidity management focuses on the ability to obtain funds
economically through assets that may be converted into cash at minimal costs or
through other sources. The Company's other sources for cash include overnight
Federal Fund lines, Federal Home Loan Bank advances, deposits of the State of
Illinois, the ability to borrow at the Federal Reserve Bank, and the Company's
operating line of credit with The Northern Trust Company. Details for the
sources include:

< First Mid Bank has $17 million available in overnight Federal Fund lines,
including $10 million from Harris Trust and Savings Bank of Chicago and $7
million from The Northern Trust Company. Availability of the funds is
subject to the First Mid Bank's meeting minimum regulatory capital
requirements for total capital to risk-weighted assets and tier 1 capital
to total assets. As of June 30, 2002, the First Mid Bank's ratios of total
capital to risk-weighted assets of 11.56% and tier 1 capital to total
assets of 7.88% exceeded minimum regulatory requirements.

< First Mid Bank can also borrow from the Federal Home Loan Bank as a source
of liquidity. Availability of the funds is subject to the pledging of
collateral to the Federal Home Loan Bank. Collateral that can be pledged
includes one-to-four family residential real estate loans and securities.
At June 30, 2002, the excess collateral at the Federal Home Loan Bank will
support approximately $26 million of additional advances.

< First Mid Bank also receives deposits from the State of Illinois. The
receipt of these funds is subject to competitive bid and requires
collateral to be pledged at the time of placement.

< First Mid Bank is also a member of the Federal Reserve System and can
borrow funds provided that sufficient collateral is pledged.

< In addition, the Company has a revolving credit agreement in the amount of
$10 million with The Northern Trust Company. The Company has an outstanding
balance of $4,325,000 as of June 30, 2002, and $5,675,000 in available
funds. The credit agreement matures on November 19, 2002. The agreement
contains requirements for the Company and First Mid Bank to maintain
various operating and capital ratios and also contains requirements for the
Company and First Mid Bank to maintain various operating and capital ratios
and also contains requirements for prior lender approval for certain sales
of assets, merger activity, the acquisition or issuance of debt, and the
acquisition of treasury stock. The Company and First Mid Bank were in
compliance with the existing covenants at June 30, 2002.

Management monitors its expected liquidity requirements carefully,
focusing primarily on cash flows from:

< lending activities, including loan commitments, letters of credit and
mortgage prepayment assumptions.

< deposit activities, including seasonal demand of private and public funds.

< investing activities, including prepayments of mortgage-backed securities
and call provisions on U.S. Government treasuries and agency securities.

< operating activities, including scheduled debt repayments and dividends to
shareholders.

The following table summarizes significant contractual obligations and
other commitments at June 30, 2002 (in thousands):

Time Operating
Deposits Borrowings* Leases Total
-------------- --------------- ------------- ------------
2002 $175,110 $58,491 $129 $233,730
2003 41,433 5,200 204 46,837
2004 8,511 5,200 204 13,915
2005 6,025 200 152 6,377
2006 2,880 5,200 126 8,206
Thereafter 256 3,200 891 4,347
-------------- --------------- ------------- ------------
Total $234,215 $77,491 $1,706 $313,412
============== =============== ============= ============
Commitments to extend credit $ 88,550

*Borrowings included at earlier of call date or maturity


For the six-month period ended June 30, 2002, net cash of $8.0 million was
provided from operating activities, while investing activities and financing
activities used net cash of $9.5 million and $6.3 million, respectively. Thus,
cash and cash equivalents decreased by $7.8 million since year-end 2001.
Generally, during 2002, the decreases in deposits and customer repurchase
agreements due to seasonal outflow reduced cash balances. Also, declines in
residential real estate loan balances due to the low rate environment were
greater than the growth in commercial loans and securities since year-end 2001.
Management believes that it has adequate sources of liquidity to meet its
contractual obligations as well as to provide for contingencies that might
reasonably be expected to occur.

Effects of Inflation

Unlike industrial companies, virtually all of the assets and
liabilities of the Company are monetary in nature. As a result, interest rates
have a more significant impact on the Company's performance than the effects of
general levels of inflation. Interest rates do not necessarily move in the same
direction or experience the same magnitude of changes as goods and services,
since such prices are affected by inflation. In the current economic
environment, liquidity and interest rate adjustments are features of the
Company's assets and liabilities which are important to the maintenance of
acceptable performance levels. The Company attempts to maintain a balance
between monetary assets and monetary liabilities, over time, to offset these
potential effects.







ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There has been no material change in the market risks faced by the
Company since December 31, 2001. For information regarding the Company's market
risk, refer to the Company's Annual Report on Form 10-K for the year ended
December 31, 2001.






PART II
ITEM 1. LEGAL PROCEEDINGS

Since First Mid Bank acts a depository of funds, it is named from time
to time as a defendant in lawsuits (such as garnishment proceedings) involving
claims to the ownership of funds in particular accounts. Management believes
that all such litigation as well as other pending legal proceedings in which the
Company is involved constitute ordinary, routine litigation incidental to the
business of the Company and that such litigation will not materially adversely
affect the Company's consolidated financial condition.



ITEM 2. CHANGES IN SECURITIES

None.



ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.



ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Annual Meeting of Stockholders was held on May 22, 2002. At the
meeting, Kenneth R. Diepholz, Gary W. Melvin and Steven L. Grissom were elected
to serve as Class I directors with terms expiring in 2005. Continuing Class III
directors (term expiring in 2004) are Charles A. Adams, Daniel E. Marvin, Jr.
and Ray Anthony Sparks and continuing Class II directors (term expiring in 2003)
are Richard A. Lumpkin and William S. Rowland. The stockholders also approved an
amendment to the First Mid-Illinois Bancshares, Inc. 1997 Stock Incentive Plan.

There were 3,068,654 issued and outstanding shares of common stock at
the time of the Annual Meeting. The voting at the meeting, on the items listed
above, was as follows:

Election of Directors For Withheld
- --------------------- --- --------
Kenneth R. Diepholz 3,047,246 21,408
Steven L. Grissom 3,042,396 26,258
Gary W. Melvin 3,046,484 22,170


Approval of Amendment to Stock Incentive Plan
For Against Withheld
--- ------- --------
2,977,125 77,930 13,599








ITEM 5. OTHER INFORMATION

None.




ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) Exhibits: The exhibits required by Item 601 of Regulation S-K and filed
herewith are listed in the Exhibit Index that follows the Signature Page
and immediately precedes the exhibits filed.

(b) Reports on Form 8-K: Form 8-K was filed by the Company on May 13, 2002 and
Form 8-K/A was filed by the Company on May 17, 2002 regarding the change in
auditor of the Company's 401(k) Profit Sharing Plan.

Form 8-K was filed by the Company on July 24, 2002 regarding plans of First
Mid Bank to open new banking centers in Champaign and Maryville, Illinois,
which are subject to regulatory approval.







SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.


FIRST MID-ILLINOIS BANCSHARES, INC.
(Company)

/s/ William S. Rowland
- --------------------------------------
William S. Rowland
President and Chief Executive Officer


/s/ Michael L. Taylor
- --------------------------------------
Michael L. Taylor
Chief Financial Officer




Dated: August 13, 2002







Exhibit Index to Form 10-Q

Exhibit
Number Description and Filing or Incorporation Reference
- --------------------------------------------------------------------------------
11.1 Statement re: Computation of Earnings Per Share
(Filed herewith on page 8)

99.1 Chief Executive Officer Certification pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 Of the
Sarbanes-Oxley Act of 2002

99.2 Chief Financial Officer Certification pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 Of the
Sarbanes-Oxley Act of 2002






Exhibit 99.1




Certification Pursuant to
18 U.S.C. Section 1350,
as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002


In connection with the Quarterly Report of First Mid-Illinois Bancshares,
Inc. (the "Company") on Form 10-Q for the period ending June 30, 2002 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, William S. Rowland, Chief Executive Officer of the Company, certify, pursuant
to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the
Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) of
the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations of
the Company.







Date: August 13, 2002 /s/ William S. Rowland
-------------------------------------
William S. Rowland
President and Chief Executive Officer




Exhibit 99.2




Certification Pursuant to
18 U.S.C. Section 1350,
as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002


In connection with the Quarterly Report of First Mid-Illinois Bancshares,
Inc. (the "Company") on Form 10-Q for the period ending June 30, 2002 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, Michael L. Taylor, Chief Financial Officer of the Company, certify, pursuant
to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the
Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) of
the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations of
the Company.







Date: August 13, 2002 /s/ Michael L. Taylor
------------------------------------
Michael L. Taylor
Chief Financial Officer