UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2003
FIRST MID-ILLINOIS BANCSHARES, INC.
401 (k) PROFIT SHARING PLAN
(Full Title of Plan)
FIRST MID-ILLINOIS BANCSHARES, INC.
1515 Charleston Avenue
P.O. Box 499
Mattoon, Illinois 61938
(Name of Issuer of the Securities Held Pursuant to the Plan
and the Address of the Principal Executive Officer)
FIRST MID-ILLINOIS BANCSHARES, INC.
401(k) PROFIT SHARING PLAN
Financial Statements and Supplemental Schedule
December 31, 2003 and 2002
(With Report of Independent Registered Public Accounting Firm Thereon)
FIRST MID-ILLINOIS BANCSHARES, INC.
401(k) PROFIT SHARING PLAN
Table of Contents
Page
Report of Independent Registered Public Accounting Firm 1
Statements of Net Assets Available for Plan Benefits 2
Statement of Changes in Net Assets Available for Plan Benefits 3
Notes to Financial Statements 4
Schedule H, Line 4i - Schedule of Assets (Held at End of Year) 9
Report of Independent Registered Public Accounting Firm
The Participants and Plan Trustee of the
First Mid-Illinois Bancshares, Inc.
401(k) Profit Sharing Plan:
We have audited the accompanying statements of net assets available for plan
benefits of the First Mid-Illinois Bancshares, Inc. 401(k) Profit Sharing Plan
as of December 31, 2003 and 2002, and the related statement of changes in net
assets available for plan benefits for the year ended December 31, 2003. These
financial statements are the responsibility of the plan administrator. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by the plan administrator, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the First
Mid-Illinois Bancshares, Inc. 401(k) Profit Sharing Plan as of December 31, 2003
and 2002, and the changes in net assets available for plan benefits for the year
ended December 31, 2003 in conformity with accounting principles generally
accepted in the United States of America.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets (held
at end of year) is presented for the purpose of additional analysis and is not a
required part of the basic financial statements but is supplementary information
required by the Department of Labor's Rules & Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974. This
supplemental schedule is the responsibility of the plan administrator. The
supplemental schedule has been subjected to the auditing procedures applied in
the audit of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
/s/ KPMG LLP
Chicago, Illinois
June 11, 2004
FIRST MID-ILLINOIS BANCSHARES, INC.
401(k) PROFIT SHARING PLAN
Statements of Net Assets Available for Plan Benefits
December 31, 2003 and 2002
2003 2002
--------------- ---------------
Assets:
Investments, at fair value:
Mutual funds $ 9,585,032 $ 6,203,795
Money market funds 257,025 571,049
Certificates of deposit 1,378,437 1,259,367
Employer common stock 7,215,610 3,955,176
Participant loans 319,348 292,283
--------------- ---------------
18,755,452 12,281,670
Receivables:
Interest and dividends 82,147 45,282
--------------- ---------------
Net assets available for plan benefits $ 18,837,599 $ 12,326,952
=============== ===============
See accompanying notes to financial statements.
FIRST MID-ILLINOIS BANCSHARES, INC.
401(k) PROFIT SHARING PLAN
Statement of Changes in Net Assets Available for Plan Benefits
Year ended December 31, 2003
Additions to net assets attributed to:
Investment income (loss):
Interest and dividends $ 272,452
Net appreciation in fair value of investments 4,589,623
--------------
Total investment income 4,862,075
--------------
Contributions:
Employer 600,494
Participants 673,255
Rollovers 429,883
--------------
Total contributions
1,703,632
--------------
Transfers to the Plan
607,580
--------------
Total additions 7,173,287
Deductions from net assets attributed to:
Benefit payments 662,640
--------------
Net increase in net assets available for plan benefits
6,510,647
Net assets available for plan benefits:
Beginning of year 12,326,952
--------------
End of year $ 18,837,599
==============
See accompanying notes to financial statements.
FIRST MID-ILLINOIS BANCSHARES, INC.
401(k) PROFIT SHARING PLAN
Notes to Financial Statements
December 31, 2003 and 2002
(1) Description of Plan
The following description of the First Mid-Illinois Bancshares, Inc.
401(k) Profit Sharing Plan (the Plan) provides only general information.
Participants should refer to the plan agreement for a more complete
description of the Plan's provisions.
General
The Plan is a defined contribution plan established January 1, 1985,
covering all eligible employees of First Mid-Illinois Bancshares, Inc.
(the Company) and any of its subsidiary corporations. All employees who
have completed one-half year of service are eligible to participate in
the Plan. Under the provisions of the Plan, each participant may direct
their contributions into any of eleven investment options available under
the Plan. The Plan currently offers eight mutual funds, a money market
fund, certificates of deposit, and the Company's common stock as
investment options for participants. Participants are also allowed to
transfer all or part of their actual balances between these funds. The
Plan is subject to the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA).
Contributions
Under the provisions of the Plan, all employees who have entered into a
compensation reduction agreement with the Company may elect to reduce
their eligible compensation by up to any percentage, subject to the
dollar limitations of Section 402(g) of the Internal Revenue Code (Code),
($12,000 for the 2003 Plan year), and to have the Company contribute this
amount to the Plan as a before-tax contribution of the participant. The
Company also makes a matching contribution calculated as a percentage of
the before-tax contribution made on behalf of each contributing
participant. The Company determines this percentage each year. Matching
contributions, however, will not exceed 2% of the eligible compensation
of each participant in any year and cannot exceed 50% of the employees
elected deferral. For the year ended December 31, 2003, the matching
contribution percentage was 2%.
The Company may also, at its sole discretion, contribute to the Plan an
amount to be determined from year to year as a profit sharing
contribution. For the year ended December 31, 2003, the profit sharing
contribution was 4% of eligible compensation. The profit sharing
contribution is maintained in a nonparticipant directed investment until
this contribution is allocated by the plan to the participant accounts.
Participants who work at least 1,000 hours of service during the Plan
year are entitled to this contribution regardless of whether they elect
to make a before-tax contribution.
Participant Accounts
Separate participant accounts are maintained for the purpose of
distributing the Plan's earnings or losses, forfeitures, voluntary
employee contributions, and employer contributions. Allocations of the
Plan's earnings or losses, forfeitures and employer contributions to the
participant accounts are based on participant earnings or account
balances, as defined in the Plan. Forfeited nonvested accounts are
allocated to participant accounts annually. The benefit to which a
participant is entitled is the benefit that can be provided from the
participant's account.
FIRST MID-ILLINOIS BANCSHARES, INC.
401(k) PROFIT SHARING PLAN
Notes to Financial Statements
December 31, 2003 and 2002
Participant Loans
Participants may borrow from their fund accounts a minimum of $1,000 up
to a maximum equal to the lesser of $50,000 or 40% of their vested
account balance. Loan transactions are treated as a transfer between the
various investment funds and participant loans. Maturity dates range from
April 2004 through October 2018. The loans are secured by the balance in
the participant's account and bear interest at a rate commensurate with
local prevailing rates as determined by the plan administrator. Interest
rates on loans outstanding at December 31, 2003 ranged from 4.00% to
9.50%. Principal and interest is paid ratably through periodic payroll
deductions.
Vesting
Participants are immediately vested in their voluntary contribution and
the Company's matching contribution, and any earnings thereon. The
Company's 4% profit sharing contribution, and any earnings thereon, vest
according to the following schedule:
Vested
Years of service Percentage
---------------------------- ------------------
1 0%
2 20
3 40
4 60
5 80
6 100
On termination of service, a participant's vested account balance will be
paid in the form of a lump sum distribution or installment payments.
Administrative Expenses
Administrative expenses of the Plan are paid by the Company.
Forfeited Accounts
Forfeitures of terminated nonvested account balances allocated to
remaining participants at December 31, 2003 and 2002 totaled $24,208 and
$23,373, respectively. Forfeitures are allocated to participant accounts
as a pro rata share based on compensation.
Plan Termination
Although it has not expressed any intent to do so, the Company has the
right under the Plan to terminate the Plan subject to the provisions of
ERISA. In the event the Plan is terminated, participants will become
fully vested in their accounts.
Transfers to the Plan
Effective November 18, 2003, the Company merged the Checkley Agency,
Inc. 401(k) Plan, with assets of $607,580 into the Plan
FIRST MID-ILLINOIS BANCSHARES, INC.
401(k) PROFIT SHARING PLAN
Notes to Financial Statements
December 31, 2003 and 2002
(2) Summary of Accounting Policies
Basis of Accounting
The financial statements of the Plan are prepared using the accrual
method of accounting in accordance with accounting principles generally
accepted in the United States of America.
Investment Valuation and Income Recognition
Quoted market prices are used to value the mutual funds and stock. Money
market accounts and certificates of deposit are valued at cost, which
approximates fair value. Participant loans are recorded at the unpaid
principal balance of the loans which approximates fair value. The Plan's
investments are held in a trust account (the Trust) administered by First
Mid-Illinois Bank & Trust (the Bank), a wholly owned subsidiary of the
Company.
Purchases and sales of securities are recorded on a trade-date basis.
Interest income is recorded on the accrual basis. Dividends are recorded
on the ex-dividend date.
Use of Estimates
The preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America requires
the plan administrator to make estimates and assumptions that affect
certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
Payment of Benefits
Benefits are recorded when paid.
(3) Investments
The following table presents the fair value of individual investments
which represent 5% or more of the Plan's net assets available for plan
benefits at December 31:
Investment Description 2002 2001
--------------------------------------------- ----------------- ------------- ------------
First Mid-Illinois Bank & Trust Certificate of
Certificate of Deposit Deposit $ 967,541 $ 877,943
Federated Max Capital Fund Mutual fund 2,111,881 1,549,310
Janus Adviser Balance Fund Mutual fund 1,226,625 1,003,246
Janus Adviser Worldwide Fund Mutual fund 1,201,757 963,317
Vanguard Growth Index Fund Mutual fund 2,295,459 1,339,681
First Mid-Illinois Bancshares, Inc. stock Common stock 7,215,610 3,955,176
FIRST MID-ILLINOIS BANCSHARES, INC.
401(k) PROFIT SHARING PLAN
Notes to Financial Statements
December 31, 2003 and 2002
During 2003, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year) appreciated
in value as follows:
Mutual funds $ 1,579,222
Common stock 3,010,401
---------------
Net appreciation in fair value
Of investments $ 4,589,623
===============
(4) Nonparticipant-Directed Investments
Information about the net assets relating to the nonparticipant-directed
investments as of December 31, 2003 and 2002, and the components of the
changes for the years ended December 31, 2003 and 2002, as follows:
2003 2002
------------ ------------
Net assets
Certificate of deposit $ 410,896 $ 381,424
Money market fund 14,494 -
Interest receivable 1,085 893
------------ ------------
Net assets $ 426,475 $ 382,317
============ ============
Changes in net assets:
Contributions $ 418,471 $ 376,644
Interest income 8,004 7,184
Transfers to participant-directed investments (382,317) (344,801)
------------ ------------
$ 44,158 $ 39,027
============ ============
FIRST MID-ILLINOIS BANCSHARES, INC.
401(k) PROFIT SHARING PLAN
Notes to Financial Statements
December 31, 2003 and 2002
(5) Tax Status of the Plan
The Company adopted a Prototype Standardized Profit Sharing Plan with a
cash or deferral arrangement which received a favorable opinion letter
from the Internal Revenue Service on August 7, 2001 stating that the Plan
and related Trust are designed in accordance with applicable sections of
the Internal Revenue Code, and the Trust is, therefore, exempt from
Federal income tax under provisions of Section 501(a). The Plan has been
amended since receiving the opinion letter. However, the plan
administrator and the Plan's legal counsel believe that the Plan is
designed and currently being operated in compliance with the applicable
requirements of the Internal Revenue Code. Therefore, no provision for
income taxes has been included in the Plan's financial statements.
(6) Transactions with Related Parties
The Plan holds certificates of deposit with First Mid-Illinois Bank &
Trust, a related party. The certificates of deposit totaled $1,378,437
and $1,259,367 at December 31, 2003 and 2002 and interest income of
$37,571 was recorded during 2003. The Plan also had an investment in
155,008 and 146,488 shares of the Company's common stock at December 31,
2003 and 2002, respectively. The common stock had a cost and fair value
of $3,191,793 and $7,215,610, respectively, at December 31, 2003 and
$2,752,336 and $3,955,176 respectively, at December 31, 2002. Related
dividends received on the Company's stock for 2003 were $101,620.
FIRST MID-ILLINOIS BANCSHARES, INC.
401(k) PROFIT SHARING PLAN
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
December 31, 2003
Number of
Shares or Current
Identity of issuer and description of investment units value
------------------------------------------------------------------------------- ----------------- ------------------
Money market accounts:
Federated Prime Obligation Funds #10 27,393 $ 27,393
Federated Prime Obligation Fund #396 541,172 541,172
NTHN Institutional Funds Government Select 2,484 2,484
Certificates of deposit:
First Mid-Illinois Bank & Trust CD; 2.96%, maturing
January 2, 2004 (nonparticipant-directed, cost of $410,896)* -- 381,424
First Mid-Illinois Bank & Trust CD; 2.96%, maturing
January 2, 2004 (participant-directed)* -- 877,943
Mutual funds:
Federated Mid Capital Index Fund 33,044 471,207
Federated Max Capital Fund 87,089 1,549,310
Federated Total Return Bond Fund 43,104 465,091
Fidelity Low Priced Stock Fund 1,832 46,109
Janus Adviser Balance Fund 47,774 1,003,246
Janus Adviser Worldwide Fund 44,577 963,317
PBHG Growth Fund 18,630 264,179
T. Rowe Price Mid-Cap Value 6,777 101,655
Vanguard Growth Index Fund 67,152 1,339,681
Common stock:
First Mid-Illinois Bancshares, Inc. * 146,488 3,955,176
Participant loans (at interest rates ranging from 4.00% to 9.50%, with
maturity dates ranging from April 2004 to October 2018) 292,283 292,283
-------------
Total investments $ 12,281,670
=============
* Party-in-interest
See accompanying report of independent registered public accounting firm.
SIGNATURES
THE PLAN. Pursuant to the requirements of the Securities Exchange Act of 1934,
the Plan Administrator has duly caused this annual report to be signed on its
behalf by the undersigned hereunto duly authorized.
FIRST MID-ILLINOIS BANCSHARES, INC.
Date: June 28, 2004 By: /s/ William S. Rowland
William S. Rowland
President and Chief Executive Officer
Exhibit Index to Annual Report on Form 11-K
Exhibit
Number Description and Filing or Incorporation Reference
----------------------- -----------------------------------------------------
23.1 Consent of KPMG LLP
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
The Board of Directors
First Mid-Illinois Bancshares, Inc.:
We consent to incorporation by reference in the registration statement (No.
33-64139) on Form S-8 of First Mid-Illinois Bancshares, Inc. of our report dated
June 11, 2004, relating to the statements of net assets available for plan
benefits of First Mid-Illinois Bancshares, Inc. 401(k) Profit Sharing Plan as of
December 31, 2003 and 2002, the related statement of changes in net assets
available for plan benefits for the year ended December 31, 2003, and the
supplemental schedule of assets (held at end of year) as of December 31, 2003,
which appears in the December 31, 2003 annual report on Form 11-K of the First
Mid-Illinois Banchshares, Inc. 401(k) Profit Sharing Plan.
/s/ KPMG LLP
Chicago, Illinois
June 25, 2004