<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
June 8, 1995
AMCORE FINANCIAL, INC.
(Exact name of registrant as specified in its charter)
Commission file number 0-13393
NEVADA 36-3183870
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
501 Seventh Street, Rockford, Illinois 61104
(815) 968-2241
Page 1 of 24
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Effective May 24, 1995, AMCORE Financial, Inc. (the "Company") consummated the
merger with NBM Bancorp, Inc. ("NBM"). The transaction resulted in the
issuance of 6.829 shares of AMCORE Common Stock for each of the 240,000
outstanding NBM shares. A total of 1,638,960 shares of AMCORE Common Stock
will be issued in the merger with cash paid in lieu of fractional shares. NBM
is the parent corporation of The National Bank of Mendota in Mendota, Illinois,
and First National Bank in Peru, Illinois. At March 31, 1995, NBM had
unaudited consolidated assets of approximately $170 million and approximately
$21 million in unaudited total stockholders' equity. The transaction will be
accounted for as a pooling of interests. NBM has its principal office in
Mendota, Illinois, and corporate-wide has 64 employees.
The Company's press release dated May 24, 1995 regarding the transaction
reported herein is attached hereto as an Exhibit.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS PAGE
----
(a) Financial Statements of Business Acquired - NBM
1. Historical Audited Financial Statements and manually
signed Independent Auditors' Report of Business
Acquired. 4
2. It is impracticable to provide any required interim
financial statements of NBM at the date of this report
on Form 8-K. Pursuant to the Commission's Rules and
Regulations, the Company anticipates that any required
financial statements will be filed within 60 days.
(b) Pro Forma Financial Information
1. Historical Pro Forma Financial Statements (Pro Forma
Financial Statements for the periods ended December 31,
1993 and 1992 are incorporated by reference to the
Company's Form S-4 Registration Statement as filed with
the Commission on February 23, 1995). It is
impracticable to provide the remaining required
historical pro forma financial information relating to
the merger with NBM at the date of this report on Form
8-K. Pursuant to the Commission's Rules and
Regulations, the Company anticipates that additional
required historical pro forma financial information will
be filed within 60 days.
2. It is impracticable to provide any required interim
pro forma financial information relating to the merger
with NBM at the date of this report on Form 8-K.
Pursuant to the Commission's Rules and Regulations, the
Company anticipates that any required interim pro forma
financial information will be filed within 60 days.
(c) Exhibits
(a) Agreement and Plan of Reorganization by and among AMCORE
Financial, Inc., NBM Acquisition, Inc., and NBM Bancorp,
Inc. dated as of November 9, 1994 (Incorporated by
reference to the Company's Amendment No. 1 to Form S-4
as filed with the Commission on February 23, 1995).
(b) Press Release dated May 24, 1995. 23
Page 2 of 24
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
AMCORE FINANCIAL, INC.
/s/ John R. Hecht
---------------------------------
John R. Hecht
Senior Vice President &
Chief Financial Officer
Date: June 8, 1995
-------------------------
Page 3 of 24
<PAGE> 4
NBM BANCORP, INC.
& SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994 AND 1993
4
<PAGE> 5
CONSOLIDATED
BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1994 1993
---- ----
<S> <C> <C>
ASSETS:
Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . . $ 5,345,772 $ 3,905,357
Interest-bearing deposits in banks . . . . . . . . . . . . . . . . . . - -
Federal funds sold . . . . . . . . . . . . . . . . . . . . . . . . . . 600,000 4,250,000
Securities available for sale (Note 2) . . . . . . . . . . . . . . . . 11,075,209 -
Securities to be held to maturity (Note 2) . . . . . . . . . . . . . . 63,264,636 84,270,783
Total loans (Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . 81,775,425 73,440,649
Less:
Allowance for possible loan losses . . . . . . . . . . . . . . . . . 681,734 655,433
Unearned discount . . . . . . . . . . . . . . . . . . . . . . . . . . 77,127 216,357
------------------------------
Net loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81,016,564 72,568,859
Premises and equipment (Note 4) . . . . . . . . . . . . . . . . . . . 1,985,662 1,167,853
Goodwill, net of amortization . . . . . . . . . . . . . . . . . . . . 342,157 365,618
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,723,517 3,587,147
------------------------------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . $ 167,353,517 $ 170,115,617
==============================
LIABILITIES AND STOCKHOLDERS' EQUITY:
LIABILITIES:
Deposits:
Noninterest-bearing . . . . . . . . . . . . . . . . . . . . . . . . $ 14,587,972 $ 14,126,448
Interest-bearing . . . . . . . . . . . . . . . . . . . . . . . . . 127,938,859 132,477,138
------------------------------
Total deposits . . . . . . . . . . . . . . . . . . . . . . . . 142,526,831 146,603,586
Short-term borrowings (Note 5) . . . . . . . . . . . . . . . . . . . 1,767,218 1,498,907
Long-term debt (Note 6) . . . . . . . . . . . . . . . . . . . . . . . 1,650,000 1,887,500
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 1,298,896 1,180,289
------------------------------
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . 147,242,945 151,170,282
MINORITY INTEREST IN SUBSIDIARY . . . . . . . . . . . . . . . . . . . . . 2,232 2,161
STOCKHOLDERS' EQUITY:
Common ($5 par value; 250,000 shares authorized,
240,000 shares issued and outstanding) . . . . . . . . . . . . . . 1,200,000 1,200,000
Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000,000 5,000,000
Net unrealized loss on securities available for sale, net
of taxes of $162,704 in 1994 . . . . . . . . . . . . . . . . . . . (315,761) -
Retained earnings (Note 9) . . . . . . . . . . . . . . . . . . . . . 14,224,101 12,743,174
------------------------------
TOTAL STOCKHOLDERS' EQUITY . . . . . . . . . . . . . . . . . . 20,108,340 18,943,174
Commitments and contingent liabilities (Note 10) . . . . . . . . . .
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY . . . . . . . . . . $ 167,353,517 $ 170,115,617
==============================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
NBM BANCORP, INC. & SUBSIDIARIES
5
<PAGE> 6
CONSOLIDATED STATEMENTS
OF EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1994 1993
---- ----
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans . . . . . . . . . . . . . . . . . . . . . . . $ 6,358,098 $ 6,215,812
Interest and dividends on investment securities:
Taxable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,324,562 4,039,687
Nontaxable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,453,503 1,508,530
Interest on deposits in banks . . . . . . . . . . . . . . . . . . . . . - -
Interest on federal funds sold . . . . . . . . . . . . . . . . . . . . . 132,473 119,959
-----------------------------
Total interest income . . . . . . . . . . . . . . . . . . . . . . 11,268,636 11,883,988
-----------------------------
INTEREST EXPENSE:
Interest on deposits . . . . . . . . . . . . . . . . . . . . . . . . . . 5,072,711 5,580,499
Interest on short-term borrowings . . . . . . . . . . . . . . . . . . . 43,984 35,173
Interest on long-term debt . . . . . . . . . . . . . . . . . . . . . . . 136,621 136,056
Less interest capitalized . . . . . . . . . . . . . . . . . . . . . . . (19,351) -
-----------------------------
Total interest expense . . . . . . . . . . . . . . . . . . . . . 5,233,965 5,751,728
-----------------------------
Net interest income before provision for
possible loan losses . . . . . . . . . . . . . . . . . . . . . . . . . 6,034,671 6,132,260
Provision for possible loan losses . . . . . . . . . . . . . . . . . . . 22,000 34,820
-----------------------------
Net interest income after provision
for Possible loan losses . . . . . . . . . . . . . . . . . . . . 6,012,671 6,097,440
-----------------------------
OTHER OPERATING INCOME:
Trust fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174,043 178,732
Deposit service charges . . . . . . . . . . . . . . . . . . . . . . . . 220,089 213,426
Other service charges . . . . . . . . . . . . . . . . . . . . . . . . . 43,404 41,972
Investment securities gains (losses), net (Note 2) . . . . . . . . . . . 208 41,906
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146,558 168,317
-----------------------------
Total other operating income . . . . . . . . . . . . . . . . . . 584,302 644,353
-----------------------------
OTHER OPERATING EXPENSES:
Salaries and employee benefits (Note 8) . . . . . . . . . . . . . . . . 1,970,141 1,889,796
FDIC Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 329,958 335,915
Net occupancy expense of premises . . . . . . . . . . . . . . . . . . . 170,729 150,934
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . 395,532 413,691
Office supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94,622 96,657
Outside services . . . . . . . . . . . . . . . . . . . . . . . . . . . . 336,840 256,120
Other real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,094 9,857
Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 651,191 673,088
-----------------------------
Total other operating expenses . . . . . . . . . . . . . . . . . 3,953,107 3,826,058
-----------------------------
Earnings before income taxes . . . . . . . . . . . . . . . . . . . . . . 2,643,866 2,915,735
Income tax expense (Note 7) . . . . . . . . . . . . . . . . . . . . . . 442,722 527,693
-----------------------------
EARNINGS before minority interest in net earnings of subsidiary . . . . . . 2,201,144 2,388,042
Minority interest in net earnings of subsidiary . . . . . . . . . . . . 217 291
-----------------------------
NET EARNINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,200,927 $ 2,387,751
=============================
Per share data:
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9.17 $ 9.95
Minority interest in net earnings of subsidiary . . . . . . . . . . . . .0009 .0012
=============================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
NBM BANCORP, INC. & SUBSIDIARIES
6
<PAGE> 7
CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
<TABLE>
<CAPTION>
UNREALIZED NET
LOSS ON UNREALIZED
MARKETABLE LOSS ON UNAPPROPRIATED
COMMON EQUITY SECURITIES RETAINED
STOCK SURPLUS SECURITIES AVAILABLE FOR SALE EARNINGS TOTAL
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT
DECEMBER 31, 1992 . . . $ 1,200,000 $ 5,000,000 $(32,979) $ - $ 11,075,423 $ 17,242,444
Unrealized loss on
marketable equity
securities . . . . . . - - 32,979 - - 32,979
Net earnings . . . . . . - - - - 2,387,751 2,387,751
Cash dividends . . . . . - - - - (720,000) (720,000)
---------------------------------------------------------------------------------------------
BALANCE AT
DECEMBER 31, 1993 . . . $ 1,200,000 $ 5,000,000 $ - $ - $ 12,743,174 $ 18,943,174
Net change in unrealized
loss on securities
available for sale,
net of taxes of
$162,704 . . . . . . . - - - (315,761) - (315,761)
Net earnings . . . . . . - - - - 2,200,927 2,200,927
Cash dividends . . . . . - - - - (720,000) (720,000)
---------------------------------------------------------------------------------------------
BALANCE AT
DECEMBER 31, 1994 . . . $ 1,200,000 $ 5,000,000 $ - $ (315,761) $ 14,224,101 $ 20,108,340
=============================================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
NBM BANCORP, INC. & SUBSIDIARIES
7
<PAGE> 8
CONSOLIDATED STATEMENTS OF
CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1994 1993
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest received . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,639,167 $12,457,468
Fees received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 605,344 603,660
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,178,994) (5,942,838)
Cash paid to suppliers and employees . . . . . . . . . . . . . . . . . . (3,632,418) (3,424,001)
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . (497,930) (497,397)
----------------------------
NET CASH FROM OPERATING ACTIVITIES . . . . . . . . . . . . . . . . . . 2,935,169 3,196,892
-----------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales and maturities of investment securities . . . . . . 28,198,965 27,706,788
Purchases of investment securities . . . . . . . . . . . . . . . . . . . (19,095,135) (21,897,768)
Net (increase) decrease in loans . . . . . . . . . . . . . . . . . . . . (8,330,475) (2,479,668)
(Increase) decrease in other assets . . . . . . . . . . . . . . . . . . (431,098) (345,372)
Proceeds from the sale of fixed assets . . . . . . . . . . . . . . . . . - 500
Premises and equipment expenditures . . . . . . . . . . . . . . . . . . (720,998) (206,273)
-----------------------------
NET CASH FROM INVESTING ACTIVITIES . . . . . . . . . . . . . . . . . . (378,741) 2,778,207
-----------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits . . . . . . . . . . . . . . . . . . . . . . . . (4,076,755) (5,758,236)
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (720,069) (720,081)
Net repayments of debt . . . . . . . . . . . . . . . . . . . . . . . . . 30,811 145,131
-----------------------------
NET CASH FROM FINANCING ACTIVITIES . . . . . . . . . . . . . . . . . . (4,766,013) (6,333,186)
-----------------------------
NET CHANGE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . $ (2,209,585) $ (358,087)
Cash and cash equivalents, beginning of period . . . . . . . . . . . . . 8,155,357 8,513,444
-----------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD . . . . . . . . . . . . . . . $ 5,945,772 $ 8,155,357
=============================
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,200,927 $ 2,387,751
Adjustments to reconcile net earnings to net cash from operating activities:
Minority interest in net earnings of subsidiary . . . . . . . . . . . . 217 291
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 275,762 289,813
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,099 42,225
Provision for possible loan losses . . . . . . . . . . . . . . . . . . . 22,000 34,820
Increase (decrease) in deferred taxes . . . . . . . . . . . . . . . . . (52,363) (13,178)
(Gains) Losses on sale of investment securities and fixed assets . . . . 153 (42,148)
Increase (decrease) in income taxes payable . . . . . . . . . . . . . . (2,845) 44,342
(Increase) decrease in interest receivable . . . . . . . . . . . . . . . 161,288 294,658
Increase (decrease) in interest payable . . . . . . . . . . . . . . . . 54,971 (191,110)
(Increase) decrease in other assets . . . . . . . . . . . . . . . . . . (41,261) (69,970)
Increase (decrease) in other liabilities . . . . . . . . . . . . . . . . 67,978 140,576
Discount accretion recorded as income . . . . . . . . . . . . . . . . . (24,210) (32,535)
Premium amortization recorded as income . . . . . . . . . . . . . . . . 372,683 490,324
Increase (decrease) in unearned discount . . . . . . . . . . . . . . . . (139,230) (178,967)
-----------------------------
$ 2,935,169 $ 3,196,892
=============================
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Other real estate and vehicles acquired in settlement of loans . . . . . $ 39,329 $ 516,887
=============================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
NBM BANCORP, INC. & SUBSIDIARIES
8
<PAGE> 9
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements of NBM Bancorp, Inc. and Subsidiaries
(Company) are prepared in conformity with generally accepted accounting
principles and prevailing practices of the banking industry. The following is
a summary of the significant accounting and reporting policies used in
preparing the financial statements. Certain reclassifications have been made
to the December 31, 1993 financial statements in order for them to be better
compared to the December 31, 1994 financial statements.
BASIS FOR CONSOLIDATION - The accompanying consolidated financial statements
include the accounts of NBM Bancorp, Inc. and the Company's wholly owned
subsidiary, the National Bank of Mendota and its 99.95% owned subsidiary, the
First National Bank In Peru. Significant intercompany transactions and
accounts have been eliminated in consolidation. The total cost of the
Company's acquisition of I.V. Bancorp & Subsidiary exceeded the fair value of
net assets acquired by approximately $469,000. This amount (net of accumulated
amortization) is shown as goodwill in the accompanying consolidated balance
sheet and is being amortized over 20 years.
INVESTMENTS IN SECURITIES - The Bank's investments in securities are classified
in three categories and accounted for as follows:
. Trading Securities. Securities held principally for resale in the near
term are classified as trading securities and recorded at their fair
values. Realized and unrealized gains and losses on trading securities
are included in other income.
. Securities to be Held to Maturity. Securities for which the Bank has the
positive intent and ability to hold to maturity are reported at cost,
adjusted for amortization of premiums, and accretion of discounts which
are recognized in interest income using the interest method over the
earlier of maturity or call date.
. Securities Available for Sale. Securities available for sale consist of
securities not classified as trading securities or as securities to be
held to maturity.
Declines in the fair value of individual held-to-maturity and
available-for-sale securities below their cost that are other than temporary
result in write-downs of the individual securities to their fair value. The
related write-downs are included in earnings as realized losses.
Unrealized holding gains and losses, net of tax, on securities available for
sale are reported as a net amount in a separate component of shareholders'
equity until realized.
Gains and losses on the sale of securities available for sale are determined
using the specific-identification method.
Statement of Financial Accounting Standards (SFAS) No. 115, Accounting For
Certain Investments In Debt And Equity Securities was issued by the Financial
Accounting Standards Board (FASB) in May, 1993, effective for fiscal years
beginning after December 15, 1993. The Bank and its subsidiaries elected to
adopt the new standard effective January 1, 1994.
LOANS - Loans are carried at the principal amount outstanding. Interest on
loans is computed on the principal balance outstanding, except that interest on
certain consumer loans is recognized using the sum-of-the-digits method. Loans
are generally placed on nonaccrual status when they are past due 90 days as to
either interest or principal. However, loans that are in the process of
renewal in the normal course of business or well secured and in the process of
collection may not be placed on nonaccrual status, at the judgment of senior
credit management. A nonaccrual loan may be restored to accrual basis when
interest and principal payments are current and prospects for future payments
are no longer in doubt.
CONTINUED ON NEXT PAGE...
NBM BANCORP, INC. & SUBSIDIARIES
9
<PAGE> 10
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Cont'd.
LOAN FEES - In December 1986, the Financial Accounting Standards Board issued
Statement No. 91, "Accounting for Nonrefundable Fees and Costs associated with
Originating or Acquiring Loans and Initial Direct Costs of Leases." The
Company has assessed SFAS No. 91 and determined that its adoption would not
materially affect net income. Therefore, nonrefundable loan origination fee
income is recognized when received and direct loan origination costs are
reflected as expense when incurred.
ALLOWANCES FOR CREDIT LOSSES - The allowance is maintained at a level adequate
to absorb probable losses. Management determines the adequacy of the allowance
based upon reviews of individual credits, recent loss experience, current
economic conditions, the risk characteristics of the various categories of
loans and other pertinent factors. Credits deemed uncollectible are charged to
the allowance. Provisions for credit losses and recoveries on loans previously
charged off are added to the allowance.
PREMISES AND EQUIPMENT - Premises and equipment are stated at cost less
accumulated depreciation. Depreciation is charged to expense on a
straight-line or accelerated basis over the estimated useful lives of the
respective assets, as follows: buildings, 15 to 40 years; equipment, 5 to 10
years.
OTHER REAL ESTATE - Other real estate owned includes foreclosures and property
acquired in forgiveness of debt, and is included in other assets in the
accompanying consolidated balance sheets. These properties are carried at the
lower of carrying value or current appraisal. Losses arising from the
acquisition of property in full or partial satisfaction of loans are treated as
loan losses. Any subsequent losses are charged to other real estate expense.
INCOME TAXES - Differences between tax income and book income arise from
certain transactions that are reportable for tax purposes in different years
than reflected in book income (timing) and transactions that are only
reportable for either tax or book purposes (permanent). Timing differences
cause the tax provision to differ from the actual tax payable on the current
year's tax return, resulting in deferred taxes. Permanent differences cause
the tax provision to be different than it would be based on statutory rates.
Statement of Financial Accounting Standards (SFAS) No. 109, Accounting For
Income Tax was issued by the Financial Accounting Standards Board (FASB) in
February 1992, effective January 1, 1993, with early adoption encouraged. The
Company and its subsidiaries elected to adopt the new standard effective
January 1, 1992.
The Company joins with its subsidiaries in filing a consolidated federal income
tax return.
Investment tax credits for purchases of equipment are treated as a reduction of
the provision for federal income taxes in the year realized.
EARNINGS PER SHARE - Earnings per share are computed on the weighted average
number of shares of common stock outstanding during each year.
CASH AND CASH EQUIVALENTS - For purposes of the statement of cash flows the
Company considers federal funds sold to be cash equivalents.
CONTINUED ON NEXT PAGE...
NBM BANCORP, INC. & SUBSIDIARIES
10
<PAGE> 11
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
2) INVESTMENT SECURITIES
The carrying value for short-term investments approximate market value because
they mature in three months or less and do not present unanticipated credit
concerns. The market value of longer term investments and mortgage-backed
securities, except certain state and municipal securities, is estimated based
on bid prices published in financial newspapers or bid quotations received from
securities dealers. The market value of certain state and municipal securities
is not readily available through market sources, so market value estimates are
based on quoted market prices of similar instruments. The following table
represents the carrying value and estimated market value of investments and
mortgage-backed securities at December 31, 1994 and 1993.
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
---- ----- ------ -----
<S> <C> <C> <C> <C>
Securities available for sale -
December 31, 1994:
U.S. Treasury obligations . . . . . . . . $ 10,064,550 $ - $ 413,143 $ 9,651,407
U.S. Government agency obligations . . . 1,052,592 - 64,571 988,021
Collateralized mortgage obligations . . . 436,608 - 827 435,781
------------- ------------ ------------ -------------
Totals $ 11,553,750 $ - $ 478,541 $ 11,075,209
============= ============ ============ =============
December 31, 1993:
Totals $ - $ - $ - $ -
============= ============ ============ =============
Securities to be held to maturity -
December 31, 1994:
U.S. Treasury obligations . . . . . . . . $ 510,864 $ - $ - $ 510,864
U.S. Government agency obligations . . . 37,664,262 - 2,198,668 35,465,594
Obligations of state and political
subdivisions . . . . . . . . . . . . . 24,585,844 - 12,194 24,573,650
Collateralized mortgage obligations . . . 256,166 111 - 256,277
Federal Reserve Bank stock . . . . . . . 247,500 - - 247,500
------------- ------------ ------------ -------------
Totals . . . . . . . . . . . . $ 63,264,636 $ 111 $ 2,210,862 $ 61,053,885
============= ============ ============ =============
December 31, 1993:
U.S. Treasury obligations . . . . . . . . $ 12,183,710 $ 257,683 $ - $ 12,441,393
U.S. Government agency obligations . . . 44,646,082 433,738 - 45,079,820
Obligations of state and political
subdivisions . . . . . . . . . . . . . . 25,581,193 1,631,801 - 27,212,994
Collateralized mortgage obligations . . . 1,612,298 509 - 1,612,807
Federal Reserve Bank stock . . . . . . . 247,500 - - 247,500
------------- ------------ ------------ -------------
Totals $ 84,270,783 $ 2,323,731 $ - $ 86,594,514
============= ============ ============ =============
</TABLE>
The amortized cost and estimated market value of debt and equity securities at
December 31, 1994 and 1993, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties.
CONTINUED ON NEXT PAGE...
NBM BANCORP, INC. & SUBSIDIARIES
11
<PAGE> 12
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
2) INVESTMENT SECURITIES, Cont'd.
<TABLE>
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1993
----------------------------- ------------------------------
ESTIMATED ESTIMATED
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
---- ----- ---- -----
<S> <C> <C> <C> <C>
Securities available for sale -
Due or repricing in one year or less . . . $ 1,801,153 $ 1,797,640 $ - $ -
Due after one year through five years . . . 8,345,074 7,935,923 - -
Due after five years through ten years . .
1,407,523 1,341,646 - -
Due after ten years . . . . . . . . . . . . - - - -
------------- ------------ ------------ -------------
$ 11,553,750 $ 11,075,209 $ - $ -
============= ============ ============ =============
Securities to be held to maturity -
Due or repricing in one year or less . . . $ 5,971,702 $ 5,840,025 $ 12,221,890 $ 12,391,543
Due after one year through five years . . . 31,831,050 31,251,495 37,444,939 38,994,996
Due after five years through ten years . . 9,406,683 8,772,749 12,442,352 12,830,717
Due after ten years . . . . . . . . . . . . 225,000 193,244 - -
------------- ------------ ------------ ------------
$ 47,434,435 $ 46,057,513 $ 62,109,181 $ 64,217,256
Mortgaged backed securities . . . . . . . . 15,582,701 14,748,872 21,914,102 22,129,758
Equity securities . . . . . . . . . . . . . 247,500 247,500 247,500 247,500
------------- ------------ ------------ ------------
$ 63,264,636 $ 61,053,885 $ 84,270,783 $ 86,594,514
============= ============ ============ ============
</TABLE>
Investment securities carried at approximately $24,329,658 at December 31, 1994
and $25,740,250 at December 31, 1993 with estimated market values of
$23,725,506 and $26,977,832 respectively were pledged to secure deposits and
for other purposes permitted or required by law.
Gross realized gains and gross realized losses on sales of securities were:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
U.S. Government and agency securities . . . . . . . . . . . . . . . . . . . $ 333 $ -
State and municipal securities . . . . . . . . . . . . . . . . . . . . . . (125) 43,362
Other securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - (1,456)
=============================
</TABLE>
3) LOANS
The composition of the loan portfolio at year end is as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Commercial, financial and agricultural . . . . . . . . . . . . . . . . . $ 19,532,971 $ 18,529,973
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,781,672 46,315,248
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,460,782 8,595,428
------------------------------
TOTAL LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 81,775,425 $ 73,440,649
==============================
</TABLE>
At December 31, 1994 and 1993 respectively, loans in nonaccrual status totaled
$694,285 and $615,261. Interest income which would have been recognized on
these loans throughout the periods was $69,443 in 1994 and $79,251 in 1993.
Nonperforming loans at December 31, 1994 and 1993 respectively, which includes
loans in nonaccrual status and loans that are past due 90 days or more and
still accruing interest totaled $741,819 and $637,989.
CONTINUED ON NEXT PAGE...
NBM BANCORP, INC. & SUBSIDIARIES
12
<PAGE> 13
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
3) LOANS, Cont'd.
The following is a summary of activity in the allowance for possible loan
losses for the years ended December 31, 1994 and 1993:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Balance, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . $ 655,433 $ 721,434
Provision charged to expense . . . . . . . . . . . . . . . . . . . . . . . . 22,000 34,820
Recoveries of loans previously charged off . . . . . . . . . . . . . . . . . 36,573 39,626
----------------------------
714,006 795,880
Less loans charged off . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,272 140,447
----------------------------
BALANCE, END OF YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 681,734 $ 655,433
============================
</TABLE>
4) PREMISES AND EQUIPMENT
The components of premises and equipment at year end were as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Land and land improvements . . . . . . . . . . . . . . . . . . . . . . . . . $ 606,204 $ 431,909
Building and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . 1,755,811 1,152,798
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . 136,063 -
Furniture, fixtures, and equipment . . . . . . . . . . . . . . . . . . . . . 2,172,878 2,016,686
----------------------------
4,670,956 3,601,393
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . 2,685,294 2,433,540
----------------------------
TOTAL PREMISES AND EQUIPMENT . . . . . . . . . . . . . . . . . . . . . . . $ 1,985,662 $ 1,167,853
============================
</TABLE>
5) SHORT-TERM BORROWINGS
The components of short-term borrowings at year end were as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Securities sold under agreements to repurchase . . . . . . . . . . . . . . . $ 1,529,718 $ 1,498,907
Current portion of long term debt (Note 6) . . . . . . . . . . . . . . . . . 237,500 -
-----------------------------
TOTAL SHORT-TERM BORROWINGS . . . . . . . . . . . . . . . . . . . . . . . $ 1,767,218 $ 1,498,907
=============================
</TABLE>
6) LONG-TERM DEBT
The components of long-term borrowings at year end were as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Notes payable to M & I Marshall & Ilsley Bank, Milwaukee, Wisconsin . . . . . $ 1,887,500 $ 1,887,500
Less amount due within one year . . . . . . . . . . . . . . . . . . . . . . . 237,500 -
-----------------------------
TOTAL LONG-TERM DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,650,000 $ 1,887,500
</TABLE>
CONTINUED ON NEXT PAGE...
NBM BANCORP, INC. & SUBSIDIARIES
13
<PAGE> 14
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
6) LONG-TERM DEBT, Cont'd.
The note payable to the M & I Marshall & Ilsley Bank bears interest at the
prime rate, is secured by the stock of the subsidiary banks, and scheduled
principal payments are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, AMOUNT
----------------------- ------
<S> <C>
1995 $ 237,500
1996 312,500
1997 1,337,500
</TABLE>
The long-term debt agreement contains certain restrictive covenants. The
Company was in compliance with such covenants at December 31, 1994.
7) INCOME TAXES
The components of federal income tax expense (benefit) for the year ended
December 31, 1994 and 1993 were as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 495,085 $ 540,871
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (52,362) (13,178)
----------------------------
TOTAL INCOME TAX EXPENSE . . . . . . . . . . . . . . . . . . . . . . . . . $ 442,723 $ 527,693
============================
</TABLE>
There is no provision or liability for state income taxes.
A reconciliation of the differences between the U.S. statutory income tax rate
and the effective tax rates with the resulting dollar amounts are shown in the
following table:
<TABLE>
<CAPTION>
1994 1993
---- ----
% OF % OF
PRETAX PRETAX
AMOUNT EARNINGS AMOUNT EARNINGS
------ -------- ------ --------
<S> <C> <C> <C> <C>
Tax expense at statutory rate . . . . . . . . . . . $ 898,914 34.00% $ 991,350 34.00%
Increase (reduction) in taxes resulting from:
Tax-exempt interest, net of premium
amortization . . . . . . . . . . . . . . . . . . (507,043) (19.18) (528,197) (18.12)
Disallowed interest expense . . . . . . . . . . . 50,039 1.89 55,223 1.90
Nondeductible amortization and excise tax . . . . 8,083 .31 9,310 .32
Other . . . . . . . . . . . . . . . . . . . . . . (7,270) (.27) 7 -
--------------------------------------------------------
TOTAL INCOME TAX EXPENSE . . . . . . . . . . . . $ 442,723 16.75 $ 527,693 18.10%
========================================================
</TABLE>
CONTINUED ON NEXT PAGE...
NBM BANCORP, INC. & SUBSIDIARIES
14
<PAGE> 15
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
7) INCOME TAXES, Cont'd.
Timing differences and the resulting deferred income tax expense (benefit) for
the years ended December 31, 1994 and 1993 were as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Securities gains (losses) difference for book and tax purposes . . . . . . . $ - $ 24,789
Depreciation difference for book and tax purposes . . . . . . . . . . . . . . (4,726) (5,403)
Subsidiary accrual to cash conversion and NOL effects for tax purposes . . . (20,459) (20,458)
Deferred officers compensation not reported for income
tax purposes until paid . . . . . . . . . . . . . . . . . . . . . . . . . . (5,025) (5,317)
Deferred directors compensation not reported for income
tax purposes until paid . . . . . . . . . . . . . . . . . . . . . . . . . . (21,494) (28,647)
Provision for loan losses for financial reporting purposes different than
for tax return purposes . . . . . . . . . . . . . . . . . . . . . . . . . . 6,755 21,858
Other timing differences . . . . . . . . . . . . . . . . . . . . . . . . . . (7,413) -
-------------------------
TOTAL DEFERRED TAX (BENEFIT) LIABILITY . . . . . . . . . . . . . . . . . . $ (52,362) $ (13,178)
=========================
</TABLE>
8) PROFIT-SHARING PLANS AND DEFINED BENEFIT PENSION PLAN
The subsidiary banks maintain noncontributory profit-sharing plans covering
substantially all officers and employees. Contributions by the subsidiary
banks to the plans totaled $157,378 in 1994 and $169,718 in 1993.
9) RETAINED EARNINGS
The amount of dividends payable by the Company on its common stock is limited
by the provisions of its long-term debt agreement with the M & I Marshall &
Ilsley Bank, Milwaukee, Wisconsin. Dividends declared by the Company are
limited to 30% of its prior year net income. The Bank received a waiver of
this provision in 1994 and 1993 so that it could pay additional dividends.
National banking regulations restrict the amount of dividends that a bank may
pay to its stockholders. Generally the regulations provide that dividends are
limited to net earnings as adjusted for the current and two preceding years,
reduced by dividends paid and any required transfers to permanent capital.
10) CREDIT RISKS, COMMITMENTS AND CONTINGENT LIABILITIES
NBM Bancorp, Inc., through its two subsidiary banks, grants commercial,
installment and residential loans to customers primarily in Mendota, Peru and
the surrounding areas. Although the loan portfolio is diversified, a
substantial portion of its debtors ability to honor their contracts is
dependent upon the agricultural economic sector. Primarily all installment and
residential loans are secured by various items of property, while approximately
85% of the commercial loans are secured by business assets and the remaining
15% is largely unsecured.
Noninterest-bearing and interest bearing deposits held at the Federal Reserve
Bank Of Chicago totaled $3,576,570 at December 31, 1994 and $2,517,423 at
December 31, 1993.
CONTINUED ON NEXT PAGE...
NBM BANCORP, INC. & SUBSIDIARIES
15
<PAGE> 16
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
10) CREDIT RISKS, COMMITMENTS AND CONTINGENT LIABILITIES, Cont'd.
NBM Bancorp, Inc. is a party to financial instruments with off-balance-sheet
risk in the normal course of business of its subsidiary banks to meet financing
needs of their customers. These financial instruments include commitments to
extend credit and unused lines of credit. The Bank's exposure to credit loss
in the event of nonperformance by the other party to the financial instrument
for commitments to extend credit is represented by the contractual amount of
those instruments. The Bank follows the same credit policy to make such
commitments as is followed for those loans and investments recorded in the
financial statements.
As of December 31, 1994 and 1993, the Bank had outstanding loan commitments and
unused lines of credit totaling $10,642,895 and $11,084,399 respectively. No
material losses are anticipated as a result of these transactions.
11) PENDING MERGER WITH AMCORE FINANCIAL, INC.
NBM Bancorp, Inc. has entered into an agreement with Amcore Financial, Inc. to
convert all outstanding shares of common stock of NBM Bancorp, Inc. into shares
of common stock of Amcore Financial, Inc.. The parties intend that the merger
qualify as a tax free reorganization under the Internal Revenue Code of 1986,
as amended, and be accounted for as a "pooling of interests" in accordance with
generally accepted accounting principles. The transaction is subject to normal
regulatory approvals and also must be approved by NBM Bancorp, Inc.
stockholders. It is anticipated that the merger will be completed during the
spring of 1995.
12) FUTURE BANK ADDITION AND RENOVATION
The Board of Directors of NBM Bancorp, Inc. has approved a major Bank addition
and renovation project for its wholly owned subsidiary, The National Bank Of
Mendota. The project is near completion and has an estimated total cost of
$1,150,000.
13) SUBLICENSE AGREEMENT
During the year ended December 31, 1994, the First National Bank in Peru
entered into a sublicense agreement with National Commerce Bank Services, Inc.
whereby First National Bank in Peru has the right to install, maintain and
operate a Financial Service Facility in the Econofoods Supermarket located in
Peru, Illinois. The First National Bank in Peru has the exclusive right to
occupy the Financial Service Facility for a period of five years. The
agreement is renewable for two additional terms of five years each. The
following is a schedule of the annual license fees for the first five year
term:
Year 1 $ 22,000.00
Year 2 - 5 29,000.00
14) RELATED PARTY TRANSACTIONS
The Bank has entered into transactions with its directors, significant
shareholders and their affiliates (Related Parties). Such transactions were
made in the ordinary course of business on substantially the same terms and
conditions, including interest rates and collateral, as those prevailing at the
same time for comparable transactions with other customers, and did not, in the
opinion of management, involve more than normal credit risk or present other
unfavorable features. The aggregate amount of loans to such related parties
was $1,393,242 at December 31, 1994 and $530,226 at December 31, 1993.
CONTINUED ON NEXT PAGE...
NBM BANCORP, INC. & SUBSIDIARIES
16
<PAGE> 17
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
15) FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards (SFAS) No. 107, Disclosure About
Fair Value of Financial Instruments, requires that the Bank disclose estimated
fair values for its financial instruments. Fair value estimates, methods and
assumptions are set forth for the Bank's financial instruments.
LIMITATIONS
The fair value estimates are made at a discrete point in time based on relevant
market information and information about financial instruments. Because no
market exists for a significant portion of the Bank's financial instruments,
fair value estimates, are based on judgments regarding future expected loss
experience, current economic conditions, risk characteristics of various
financial instruments, and other factors. These estimates are subjective in
nature and involve uncertainties and matters of significant judgment and
therefore cannot be determined with precision. Changes in assumptions could
significantly affect the estimates. The reader is encouraged to use different
assumptions to calculate fair values for the Bank's financial instruments if
such assumptions are believed to be more appropriate.
In addition, the fair value estimates are based on existing on and off-balance
sheet financial instruments without attempting to estimate the value of
anticipated future business and the value of assets and liabilities that are
not considered financial instruments. For example, the Bank has a substantial
trust department that contributes net fee income annually. The trust
department is not considered a financial instrument and its value has not been
incorporated into the fair value estimates. Other significant assets and
liabilities that are not considered financial assets or liabilities include the
mortgage banking operation, franchise value, brokerage network, deferred taxes,
property plant and equipment, and goodwill. In addition, as described for
investments and mortgage-backed securities, the tax ramifications related to
the realization of the unrealized gains and losses, can have a significant
effect on fair value estimates and have not been considered in many of the
estimates.
Because of the wide range of valuation techniques and the numerous estimates
which must be made, it may be difficult to make reasonable comparisons of NBM
Bancorp Inc.'s fair value information to that of other financial institutions.
It is important that the many uncertainties discussed within this footnote be
considered when using the estimated fair value disclosures and to realize that
because of these uncertainties, the aggregate fair value amount should in no
way be construed as representative of the underlying value of NBM Bancorp,
Inc..
The book values and estimated fair values for balance sheet financial
instruments as of December 31, 1994 and 1993 are reflected below.
BALANCE SHEET FINANCIAL INSTRUMENTS ($ IN MILLIONS)
<TABLE>
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1993
----------------- -----------------
ESTIMATED ESTIMATED
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
---- ----- ---- -----
<S> <C> <C> <C> <C>
Financial Assets:
Cash, due from banks, federal funds sold,
investments and mortgage backed securities . . . . . . $ 80.3 $ 78.1 $ 92.4 $ 94.7
Net loans . . . . . . . . . . . . . . . . . . . . . . . . 81.0 78.7 72.6 73.9
Financial Liabilities:
Deposits . . . . . . . . . . . . . . . . . . . . . . . . $ 142.5 $ 142.4 $ 146.6 $ 147.1
Short term borrowings . . . . . . . . . . . . . . . . . . 1.8 1.8 1.5 1.5
Long term borrowings . . . . . . . . . . . . . . . . . . 1.7 1.7 1.9 1.9
</TABLE>
CONTINUED ON NEXT PAGE...
NBM BANCORP, INC. & SUBSIDIARIES
17
<PAGE> 18
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
15) FAIR VALUE OF FINANCIAL INSTRUMENTS, Cont'd.
CASH, DUE FROM BANKS, FEDERAL FUNDS SOLD, INVESTMENTS AND MORTGAGE-BACKED
SECURITIES
The carrying value for cash, due from banks, federal funds sold and short-term
investments approximate fair value because they mature in three months or less
and do not present unanticipated credit concerns. The fair value of longer
term investments and mortgage-backed securities, except certain state and
municipal securities, is estimated based on bid prices published in financial
newspapers or bid quotations received from securities dealers. The fair value
of certain state and municipal securities is not readily available through
market sources, so fair value estimates are based on quoted market prices of
similar instruments.
SFAS No. 107 specifies that fair values should be calculated based on the value
of one unit, without regard to any premium or discounts that may result from
concentrations of ownership of a financial instrument, possible tax
ramifications, or estimated transaction costs, therefore the above amounts are
reported at gross.
LOANS
Fair values are estimates for portfolios of loans with similar financial
characteristics. Loans are segregated by type, such as commercial, commercial
real estate, residential mortgage, credit card, and other consumer. Each loan
category is further segmented into fixed and adjustable rate interest terms,
and by performing, and nonperforming categories.
The fair value of performing loans, except residential mortgage and credit card
loans, is calculated by discounting contractual cash flows using estimated
market discount rates which reflect the credit and interest rate risk inherent
in the loan. For performing residential mortgage loans, fair value is
estimated by discounting contractual cash flows adjusted for prepayment
estimates using discount rates based on secondary market sources adjusted to
reflect differences in servicing and credit costs. For credit card loans, cash
flows and maturities are estimated based on contractual interest rates and
historical experience and are discounted using secondary market rates adjusted
for differences in servicing and credit costs.
Fair value for significant nonperforming loans is based on recent internal or
external appraisals. If appraisals are not available, estimated cash flows are
discounted using a rate commensurate with the risk associated with the
estimated cash flows. Assumptions regarding credit risk, cash flow, and
discount rates are judgmentally determined using available market information
and specific borrower information.
The fair value estimate for credit card loans is based on the value of existing
loans at December 31, 1994 and 1993. The estimate does not include the value
that relates to estimated cash flows from new loans generated from existing
cardholders over the remaining life of the portfolio.
DEPOSIT LIABILITIES
Under SFAS No. 107, the fair value of deposits with no stated maturity, such as
non-interest bearing demand deposits, savings and NOW accounts, and money
market and checking accounts, is equal to the amount payable on demand as of
December 31, 1994 and 1993. The fair value of certificates of deposit is based
on the discounted value of contractual cash flows. The discount rate is
estimated using the rates currently offered for deposits of similar remaining
maturities.
The fair value estimates above do not include the benefit that results from the
low-cost funding provided by the deposit liabilities compared to the cost of
borrowing funds in the market.
BORROWINGS
The fair value estimates for short term debt approximate their carrying value.
Rates currently available to the Bank for long term debt with similar terms and
remaining maturities are used to estimate fair value of existing debt.
CONTINUED ON NEXT PAGE...
NBM BANCORP, INC. & SUBSIDIARIES
18
<PAGE> 19
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
15) FAIR VALUE OF FINANCIAL INSTRUMENTS, Cont'd.
COMMITMENTS TO EXTENDED CREDIT, STANDBY LETTERS OF CREDIT, AND FINANCIAL
GUARANTEES WRITTEN
The fair value of commitments to extend credit is estimated using the fees
currently charged to enter similar agreements, taking into account the
remaining terms of the agreement and the present credit worthiness of the
counter parties. For fixed rate loan commitments, fair value also considers
the difference between current levels of interest rates and the committed
rates. The fair value of financial guarantees written and letters of credit is
based on fees currently charged for similar agreements or on the estimated cost
to terminate them or otherwise settle the obligations with the counter parties.
The contract amount, carrying amount, and estimated fair value for commitments
to extend credit, standby letters of credit, and financial guarantees written
follow:
<TABLE>
<CAPTION>
AT DECEMBER 31, 1994
------------------------------------
CONTRACT CARRYING ESTIMATED
AMOUNT AMOUNT FAIR VALUE
------ ------ ----------
<S> <C> <C> <C>
Commitments to extend credit . . . . . . . . . . . . . . . . $ 9,242,887 $ - $ -
Standby letters of credit . . . . . . . . . . . . . . . . . . 1,400,008 - 7,000
Financial guarantees . . . . . . . . . . . . . . . . . . . . - - -
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, 1993
------------------------------------
CONTRACT CARRYING ESTIMATED
AMOUNT AMOUNT FAIR VALUE
------ ------ ----------
<S> <C> <C> <C>
Commitments to extend credit . . . . . . . . . . . . . . . . $ 10,405,641 $ - $ -
Standby letters of credit . . . . . . . . . . . . . . . . . . 678,758 - 3,394
Financial guarantees . . . . . . . . . . . . . . . . . . . . - - -
</TABLE>
The amounts shown under "carrying amount" represent accruals or deferred income
arising from these unrecognized financial instruments.
CONTINUED ON NEXT PAGE...
NBM BANCORP, INC. & SUBSIDIARIES
19
<PAGE> 20
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
16) CONDENSED FINANCIAL INFORMATION OF NBM BANCORP, INC.
(PARENT COMPANY ONLY FINANCIAL STATEMENTS)
The following condensed financial statements are presented for the Corporation
alone (that is, without consolidation of the subsidiaries' financial
information).
CONDENSED BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
<TABLE>
<CAPTION>
DECEMBER 31,
------------
ASSETS: 1994 1993
---- ----
<S> <C> <C>
Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . . $ 35,142 $ 15,930
Investment in subsidiaries . . . . . . . . . . . . . . . . . . . . . . . 21,635,385 20,458,123
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 383,932 403,381
------------------------------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 22,054,459 $ 20,877,434
==============================
LIABILITIES:
Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . $ 237,500 $ -
Long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . 1,650,000 1,887,500
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,619 46,760
------------------------------
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . 1,946,119 1,934,260
------------------------------
STOCKHOLDERS' EQUITY:
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200,000 1,200,000
Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000,000 5,000,000
Net Unrealized loss on securities available for sale
net of taxes of $162,703 in 1994 . . . . . . . . . . . . . . . . . . . (315,761) -
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,224,101 12,743,174
------------------------------
TOTAL STOCKHOLDERS' EQUITY . . . . . . . . . . . . . . . . . . . . . 20,108,340 18,943,174
------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY . . . . . . . . . . . . . $ 22,054,459 $ 20,877,434
==============================
</TABLE>
CONDENSED STATEMENTS OF EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
<TABLE>
<CAPTION>
DECEMBER 31,
------------
INCOME: 1994 1993
---- ----
<S> <C> <C>
Dividends received from subsidiaries . . . . . . . . . . . . . . . . . . $ 871,331 $ 844,319
Interest on deposits in banks . . . . . . . . . . . . . . . . . . . . . - 268
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 723 29,499
------------------------------
TOTAL INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . 872,054 874,086
------------------------------
EXPENSES:
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136,621 136,056
Amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . 32,432 42,225
Other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,041 15,465
------------------------------
TOTAL EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . 236,094 193,746
------------------------------
Income before income taxes and equity in
undistributed income of subsidiaries . . . . . . . . . . . . . . . . . 635,960 680,340
Applicable income taxes (benefit) . . . . . . . . . . . . . . . . . . . (71,944) (46,442)
------------------------------
Income before equity in undistributed income of
subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 707,904 726,782
Equity in undistributed income of subsidiaries . . . . . . . . . . . . . 1,493,023 1,660,969
------------------------------
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,200,927 $ 2,387,751
==============================
NET INCOME PER SHARE . . . . . . . . . . . . . . . . . . . . . . . . $ 9.17 $ 9.95
Weighted average shares outstanding . . . . . . . . . . . . . . . . 240,000 240,000
</TABLE>
CONTINUED ON NEXT PAGE...
NBM BANCORP, INC. & SUBSIDIARIES
20
<PAGE> 21
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
16) CONDENSED FINANCIAL INFORMATION OF NBM BANCORP, INC., Cont'd.
(PARENT COMPANY ONLY FINANCIAL STATEMENTS)
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1994 1993
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest and dividends received . . . . . . . . . . . . . . . . . . . . $ 860,417 $ 842,939
Fees received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 723 727
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (127,472) (145,442)
Cash paid to suppliers and employees . . . . . . . . . . . . . . . . . (64,463) (15,483)
Income taxes (paid) received . . . . . . . . . . . . . . . . . . . . . 70,007 45,351
------------------------------
NET CASH FROM OPERATING ACTIVITIES . . . . . . . . . . . . . . . . . 739,212 728,092
------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales and maturities of investment securities . . . . . . - 675,000
------------------------------
NET CASH FROM INVESTING ACTIVITIES . . . . . . . . . . . . . . . . . - 675,000
------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distribution of escrow account . . . . . . . . . . . . . . . . . . . . - -
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . (720,000) (720,000)
Net (repayments) proceeds from debt . . . . . . . . . . . . . . . . . . - (700,000)
------------------------------
NET CASH FROM FINANCING ACTIVITIES . . . . . . . . . . . . . . . . . (720,000) (1,420,000)
-----------------------------
NET CHANGE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . . $ 19,212 $ (16,908)
Cash and cash equivalents, beginning of period . . . . . . . . . . . . 15,930 32,838
------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD . . . . . . . . . . . . . . $ 35,142 $ 15,930
==============================
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,200,927 $ 2,387,751
Adjustments to reconcile net earnings to net cash
from operating activities:
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,432 42,225
Increase (decrease) in income tax payable . . . . . . . . . . . . . . . (1,937) (1,109)
(Increase) decrease in interest and dividends receivable . . . . . . . (10,914) (29,070)
Increase (decrease) in interest payable . . . . . . . . . . . . . . . . 9,149 (9,386)
Increase (decrease) in other liabilities . . . . . . . . . . . . . . . 2,578 -
Discount accretion recorded as income . . . . . . . . . . . . . . . . . - (1,350)
Undistributed income of subsidiary . . . . . . . . . . . . . . . . . . (1,493,023) (1,660,969)
------------------------------
$ 739,212 $ 728,092
===============================
</TABLE>
NBM BANCORP, INC. & SUBSIDIARIES
21
<PAGE> 22
INDEPENDENT AUDITORS' REPORT
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS
NBM BANCORP, INC. & SUBSIDIARIES
We have audited the accompanying consolidated balance sheets of NBM BANCORP,
INC. & SUBSIDIARIES as of December 31, 1994 and 1993, and the related
consolidated statements of earnings, stockholders' equity and cash flows for
the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 management, 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of NBM BANCORP, INC. &
SUBSIDIARIES at December 31, 1994 and 1993, the results of its operations and
its cash flows for the periods then ended in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The comparative financial
statements for the subsidiaries are presented for purposes of additional
analysis and are not a required part of the basic consolidated financial
statements. Such information has been subjected to the auditing procedures
applied in the audits of the basic consolidated financial statements and, in
our opinion, is fairly stated in all material respects in relation to the basic
consolidated financial statements taken as a whole.
February 3, 1995
Mendota, Illinois
BOKUS & MAY, P.C.
BOKUS & MAY, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
NBM BANCORP, INC. & SUBSIDIARIES
22
<PAGE> 1
NEWS RELEASE
EXHIBIT 99
Date: May 24, 1995
Contact: Ben Rubendall [AMCORE LOGO]
815-961-7164
AMCORE FINANCIAL, INC. COMPLETES NBM BANCORP, INC. MERGER,
REPORTS PLANS TO TAKE $3.0 TO $4.0 MILLION CHARGE FOR MERGER COSTS
AND EARLY ADOPTION OF NEW ACCOUNTING RULE
ROCKFORD, IL - AMCORE Financial, Inc. announced today that it has completed
the merger of NBM Bancorp, Inc. in Mendota, Illinois. NBM Bancorp has assets of
approximately $170 million and operates banks in Mendota and Peru, Illinois.
AMCORE issued 1,638,960 shares of its stock in exchange for all 240,000 NBM
common shares outstanding.
AMCORE also announced it will recognize about $1.0 million in after-tax
expenses related to the NBM and other recent mergers, plus approximately $2.0
to $3.0 million in non-cash charges in connection with the early adoption of
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets" issued recently. Total after-tax charges for
the merger expenses and the implementation of the new accounting rules should
be approximately $3.0 to $4.0 million.
NBM owns The National Bank of Mendota, which has one location, 36 employees
and assets of $116 million; and First National Bank in Peru, which has 28
employees, two locations and assets of $51 million. Both communities are
located on Interstate 39 south of Rockford.
"All of the regulatory approvals have been received and the transaction was
completed effective May 24, 1995," said Carl J. Dargene, AMCORE chairman,
president and chief executive officer. "We are happy to welcome the banks in
Mendota and Peru to the AMCORE family."
"The new accounting rule requires a revaluation of certain longer-term
assets, including intangibles that due to a change in events or other
circumstances raise uncertainty as to the recoverability of the full carrying
value. We felt it was in the best interest of our shareholders to immediately
implement the new rule so its impact can be taken into consideration now, even
though it is not mandatory until Jan. 1, 1996," said Dargene.
"Actually, the new standard does not increase our expenses in the long-run,"
Dargene said. "The primary effect will be an acceleration of depreciation and
amortization charges on assets. Obviously, taking these charges now reduces
future expenses which should bode well for future earnings."
23
AMCORE Financial, Inc.
501 Seventh Street, Post Office Box 1537, Rockford, Illinois 61110-0037
Telephone 815 968-2241
<PAGE> 2
AMCORE Acquires
Page 2 of 2
In general, the charges relate to adjustments of purchase accounting values
assigned to the former Illinois National Bank main bank property, certain
capitalized costs incurred during data processing conversions, and write downs
on goodwill and other intangibles in connection with our collection agency. In
total, these charges will reduce earnings by between $0.23 and $0.28 cents per
share in the second quarter.
"Despite the one-time expenses and the impact of higher funding costs,
AMCORE should report positive per share earnings in the second quarter of
between six to 10 cents. On a year-to-year basis, we expect our earnings for
1995 will be approximately equal to our 1994 earnings of $19.6 million,
excluding the one-time expenses and Mendota earnings.
"These estimates do not include the impact of an expected reduction in
Federal Deposit Insurance Corp. premiums which are anticipated for the second
half of the year and could add approximately $1.5 million to $2.0 million in
pre-tax earnings this year," Dargene said.
AMCORE Financial, Inc. is a northern Illinois-based bank holding company
with assets of approximately $2.2 billion. Its holdings now include nine
subsidiary banks operating in 37 locations.
The company also has seven primary financial service subsidiaries: a trust
company, a mortgage company, a full-service broker-dealer, a capital management
company, a collection agency, a consumer finance company, and an insurance
company. AMCORE common stock is listed on NASDAQ under the symbol "AMFI".
###
24
