<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
Commission file number 0-13393
AMCORE FINANCIAL, INC.
NEVADA 36-3183870
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
501 Seventh Street, Rockford, Illinois 61104
Telephone number (815) 968-2241
Indicate by check mark whether the registrant (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
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
The number of shares outstanding of the registrant's Common stock, par value
$.33 per share, at April 30, 1996 was 14,200,289 shares.
Index of Exhibits Page 1 of 34
on Page 12
<PAGE> 2
AMCORE FINANCIAL, INC.
Form 10-Q Table of Contents
PART 1 Page Number
ITEM 1 Financial Statements
Consolidated Balance Sheets as of March 31, 1996 and
December 31, 1995 ...................................... 3
Consolidated Statements of Income for the Three
Months Ended March 31, 1996 and 1995 ................... 4
Consolidated Statements of Cash Flows for the Three
months Ended March 31, 1996 and 1995 ................... 5
Notes to Consolidated Financial Statements ............... 6
ITEM 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations .................... 7
PART II
ITEM 4 Submission of Matters to a Vote of Security Holders ...... 12
ITEM 6 Exhibits and Reports on Form 10-Q ....................... 12
Signatures ....................................................... 14
2
<PAGE> 3
AMCORE Financial, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
(in thousands, except share data) 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets Cash and cash equivalents............................................................... $ 96,365 $ 101,082
Interest earning deposits in banks...................................................... 316 260
Federal funds sold and other short-term investments..................................... 2,265 9,050
Mortgage loans held for sale............................................................ 11,318 15,801
Securities available for sale........................................................... 1,140,823 884,044
Securities held to maturity (market value of $16,916 in 1996; $24,967 in 1995).......... 16,818 24,625
-----------------------
Total securities................................................................... 1,157,641 $908,669
Loans and leases, net of unearned income................................................ 1,305,115 1,285,961
Allowance for loan and lease losses..................................................... (13,255) (13,061)
-----------------------
Net loans and leases............................................................... $1,291,860 $1,272,900
-----------------------
Premises and equipment, net............................................................. 48,862 49,670
Intangible assets, net.................................................................. 13,793 14,314
Other real estate owned................................................................. 890 2,116
Other assets............................................................................ 49,962 44,670
-----------------------
TOTAL ASSETS....................................................................... $2,673,272 $2,418,532
=======================
Liabilities LIABILITIES
And Deposits:
Stockholders' Interest bearing...................................................................... $1,554,570 $1,512,473
Equity Non-interest bearing.................................................................. 241,541 265,232
-----------------------
Total deposits..................................................................... $1,796,111 $1,777,705
Short-term borrowings................................................................... 457,049 292,042
Long-term borrowings.................................................................... 178,893 107,803
Other liabilities....................................................................... 34,540 31,120
-----------------------
TOTAL LIABILITIES.................................................................. $2,466,593 $2,208,670
-----------------------
STOCKHOLDERS' EQUITY
Preferred stock, $1 par value: authorized 10,000,000 shares;
issued none........................................................................... $ - $ -
Common stock, $.33 par value: authorized 30,000,000 shares;
March 31, December 31,
1996 1995
Issued........14,926,695 14,926,695
Outstanding...14,200,289 14,174,183 4,976 4,976
Additional paid-in capital.............................................................. 56,503 56,412
Retained earnings....................................................................... 152,675 149,315
Treasury stock and other................................................................ (6,544) (6,659)
Net unrealized gain (loss) on securities available for sale............................. (931) 5,818
-----------------------
TOTAL STOCKHOLDERS' EQUITY......................................................... $ 206,679 $ 209,862
-----------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY......................................... $2,673,272 $2,418,532
========================
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
AMCORE Financial, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
(in thousands, except per share data) 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest Interest and fees on loans and leases............................................... $28,550 $25,376
Income Interest on securities:
Taxable............................................................................ 12,114 9,292
Tax-exempt......................................................................... 3,020 2,980
---------------------
Total Income from Securities...................................................... $15,134 $12,272
---------------------
Interest on federal funds sold and other short-term investments..................... 191 138
Interest and fees on mortgage loans held for sale................................... 758 465
Interest on deposits in banks....................................................... 4 9
---------------------
Total Interest Income............................................................. $44,637 $38,260
---------------------
Interest Interest on deposits................................................................ $17,269 $15,087
Expense Interest on short-term borrowings................................................... 4,507 3,250
Interest on long-term borrowings.................................................... 2,156 462
Other............................................................................... 109 126
---------------------
Total Interest Expense............................................................ $24,041 $18,925
---------------------
Net Interest Income................................................................. $20,596 $19,335
Provision for loan and lease losses............................................... 889 729
---------------------
Net Interest Income After Provision for Loan and Lease Losses....................... $19,707 $18,606
---------------------
Other Trust and asset management income................................................... $ 3,242 $ 2,943
Income Service charges on deposits......................................................... 1,680 1,732
Mortgage revenues................................................................... 733 561
Collection fee income............................................................... 582 453
Other............................................................................... 1,953 1,738
---------------------
Total Other Income, Excluding Net Realized Security Gains......................... $ 8,190 $ 7,427
Net realized security gains......................................................... 764 619
---------------------
Total Other Income................................................................ $ 8,954 $ 8,046
Operating Compensation expense................................................................ $ 8,996 $ 8,638
Expenses Employee benefits................................................................... 2,930 2,687
Net occupancy expense............................................................... 1,385 1,366
Equipment expense................................................................... 1,879 1,638
Professional fees................................................................... 608 567
Advertising and business development................................................ 554 510
Amortization of intangible assets................................................... 512 642
Insurance expense................................................................... 197 1,134
Other............................................................................... 3,927 3,491
---------------------
Total Operating Expenses.......................................................... $20,988 $20,673
---------------------
Income Before Income Taxes.......................................................... $ 7,673 $ 5,979
Income taxes........................................................................ 2,043 1,362
---------------------
NET INCOME........................................................................ $ 5,630 $ 4,617
=====================
EARNINGS PER COMMON SHARE......................................................... $ 0.40 $ 0.33
DIVIDENDS PER COMMON SHARE........................................................ 0.16 0.13
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING........................................ 14,192 14,049
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
AMCORE Financial, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
(in thousands) 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows NET INCOME..................................................................................... $ 5,630 $ 4,617
From Adjustments to reconcile net income to net
Operating cash provided by operating activities:
Activities Depreciation and amortization of premises and equipment...................................... 985 1,179
Amortization and accretion of securities, net................................................ 1,250 (31)
Provision for loan and lease losses.......................................................... 889 729
Amortization of intangible assets............................................................ 512 642
Gain on sale of securities available for sale................................................ (804) (661)
Loss on sale of securities available for sale................................................ 40 42
Purchase of trading securities............................................................... - (3,016)
Proceeds from sale of trading securities..................................................... - 3,016
Non-employee directors compensation expense.................................................. 119 87
Deferred income taxes........................................................................ 1,038 (323)
Net decrease in mortgage loans held for sale................................................. 4,483 243
Other, net................................................................................... 3,220 2,373
----------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES................................................... $ 17,362 $ 8,897
----------------------
Cash Flows Proceeds from maturities of securities......................................................... $ 61,162 $ 35,589
From Proceeds from sales of securities available for sale........................................... 84,057 33,249
Investing Purchase of securities held to maturity........................................................ - (12,208)
Activities Purchase of securities available for sale...................................................... (405,820) (31,125)
Net decrease(increase) in federal funds sold and other short-term investments.................. 6,785 (4,333)
Net increase in interest earning deposits in banks............................................. (56) (9)
Net increase in loans and leases............................................................... (20,309) (27,748)
Proceeds from the sale of premises and equipment............................................... 553 130
Premises and equipment expenditures............................................................ (730) (3,143)
----------------------
NET CASH REQUIRED FOR INVESTING ACTIVITIES.................................................. ($274,358) ($9,598)
----------------------
Cash Flows Net decrease in demand deposits and savings accounts........................................... ($31,901) ($27,153)
From Net increase in time deposits.................................................................. 50,307 59,499
Financing Net increase(decrease) in short-term borrowings................................................ 165,007 (32,697)
Activities Proceeds from long-term borrowings............................................................. 71,500 -
Payment of long-term borrowings................................................................ (451) (2,105)
Dividends paid................................................................................. (2,270) (1,861)
Proceeds from exercise of incentive stock options.............................................. 87 189
----------------------
NET CASH PROVIDED BY(REQUIRED FOR) FINANCING ACTIVITIES..................................... $252,279 ($4,128)
----------------------
Net change in cash and cash equivalents........................................................ ($4,717) ($4,829)
----------------------
Cash and cash equivalents:
Beginning of year............................................................................. 101,082 92,201
----------------------
End of period................................................................................. $ 96,365 $ 87,372
======================
Supplemental
Disclosures Cash payments for:
of Cash
Flow Interest paid to depositors................................................................... $ 16,660 $ 13,516
Information Interest paid on borrowings................................................................... 5,715 3,903
Income taxes paid............................................................................. 108 377
Non-Cash
Investing Other real estate acquired in settlement of loans.............................................. 460 53
Activities
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
ITEM 1 - FINANCIAL STATEMENTS (CONTINUED)
AMCORE FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial reporting and with instructions for Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, these financial statements do not include all the
information and footnotes required by generally accepted accounting
principles. These financial statements include, however, all adjustments
(consisting of normal recurring accruals), which in the opinion of management
are considered necessary for the fair presentation of the results of operations
for the periods shown.
The consolidated financial statements and the financial information have been
restated to reflect the merger with NBM Bancorp, Inc. (NBM), which was accounted
for using the pooling of interests method. Operating results for the three
month period ended March 31, 1996 are not necessarily indicative of the
results that may be expected for the fiscal year ending December 31, 1996.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Form 10-K Annual Report of AMCORE Financial,
Inc. and Subsidiaries (the "Company") for the year ended December 31, 1995.
NOTE 2 - EARNINGS PER SHARE
Earnings per share is based on dividing net income by the weighted average
number of shares of common stock outstanding during the periods, adjusted for
common stock equivalents. Common stock equivalents consist of shares issuable
under options granted pursuant to stock plans. The fully dilutive effect of
common stock equivalents on earnings per share was less than three percent for
all periods presented. Share data for all prior year periods presented have
been restated to reflect the merger with NBM.
NOTE 3 - LONG-TERM BORROWINGS
The Company has a term loan agreement (Agreement) with an unaffiliated
financial institution that requires semi-annual principal payments and allows
several interest rate and funding period options. At March 31, 1996, the
balance was $17 million at an interest rate of 6.90%.
The Agreement contains several restrictive covenants, including limitations on
dividends to stockholders, maintenance of various capital adequacy levels, and
certain restrictions with regard to other indebtedness. All capital adequacy
ratios remained well above the required minimums per the Agreement.
In late 1995 and early 1996, several of the Company's subsidiary banks borrowed
a total of $159,750,000 from the Federal Home Loan Bank in connection with the
purchase of mortgage-backed securities. The average maturity of these
borrowings is 2.4 years, with a weighted average borrowing rate of 5.67%.
Scheduled reductions of long-term borrowings are as follows:
<TABLE>
<CAPTION>
========================================================================
(in thousands) Total
- ------------------------------------------------------------------------
<S> <C>
1996 ..................................................... $ 7,297
1997 ..................................................... 32,218
1998 ..................................................... 50,725
1999 ..................................................... 28,751
2000 ..................................................... 59,030
Thereafter ............................................... 872
- ------------------------------------------------------------------------
TOTAL .................................................. $178,893
========================================================================
</TABLE>
Other long-term borrowings include a non-interest bearing note from the
January 1993 acquisition of Rockford Mercantile Agency. The note requires
annual payments of $444,000 beginning in 1994 through 2002. The note was
discounted at an interest rate of 8.0%
6
<PAGE> 7
AMCORE FINANCIAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's discussion and analysis focuses on the significant factors which
affected AMCORE Financial, Inc. and subsidiaries (the "Company") financial
condition as of March 31, 1996 as compared to December 31, 1995 and the results
of operations for the three months ended March 31, 1996 as compared to the same
period in 1995. This discussion is intended to be read in conjunction with the
consolidated financial statements and notes thereto appearing elsewhere in this
report.
EARNINGS SUMMARY
Net income for the first quarter of 1996 totaled $5.6 million, an increase of
21.9% from the first quarter of 1995. On a per share basis, net earnings were
$.40 per share in 1996 versus $.33 in the first quarter of 1995. These increases
were primarily the result of higher levels of net interest income and fee-based
revenues and the elimination of FDIC deposit insurance premiums.
Net interest income rose by $1.3 million or 6.5% due to increased loan volumes
and the impact of an investment leveraging program. Total fee-based income,
exclusive of security gains, increased by 10.3% or $763,000 as a result of
higher trust and mortgage revenues. Total operating expenses increased only
$315,000 or 1.5%, as total insurance expense declined $937,000 due to the
elimination of FDIC premiums.
The return on average equity (ROE) was 10.77% through the first three months of
1996 as compared to 9.94% for 1995. The return on average assets (ROA) for the
first quarter of 1996 was .92% versus .87% a year earlier.
NET INTEREST INCOME
Net interest income, the Company's primary source of earnings, totaled $20.6
million in the first quarter of 1996, an increase of $1.3 million or 6.5% when
compared with $19.3 million in 1995. In the following analysis, net interest
income is presented on a tax equivalent basis, which adjusts reported interest
income on tax-exempt loans and securities to compare with other sources of
fully taxable interest income. Unlike changes in volume, or rates paid or
earned, it has no effect on actual net interest income or net income, as
reported in the Consolidated Financial Statements.
As shown in the following table, tax equivalent net interest income totaled
$22.3 million and increased $1.3 million in the first quarter of 1996 as
compared to the prior year quarter. This increase was due to a $2.0 million
increase from volume, less a $674,000 unfavorable rate impact. The net interest
margin, which is computed by dividing the annualized tax equivalent net
interest income by the average earning assets, declined 43 basis points to
3.85% as compared to 4.28% for the first quarter of 1995. This decline was due
to a shift in deposit mix to higher rate time deposits, which was partially
offset by loan growth.
Another factor contributing to the net interest margin decline was the impact
of an investment leveraging program, which is designed to better deploy
underutilized capital at affiliate banks and improve the return on equity. The
program is funded through repurchase agreements and Federal Home Loan Bank
(FHLB) borrowings, the proceeds of which are invested in mortgage-backed
securities. While this program results in additional net interest income, it
also lowers the net interest margin due to the smaller interest rate spread
associated with these transactions. This program added approximately $901,000
to net interest income in the first quarter of 1996. It reduced, however, the
net interest margin by 31 basis points.
7
<PAGE> 8
ANALYSIS OF NET INTEREST INCOME-TAX EQUIVALENT BASIS
Unaudited Quarters Ended March 31,
(in thousands)
<TABLE>
<CAPTION>
1996/1995
Interest Earned Change
Average Balance Average Rate or Paid Due to
- --------------------------------------------------------------------------------------------------------------------------
1996 1995 1996 1995 1996 1995 Volume Rate
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS:
$ 745,028 $ 538,570 6.43% 6.90% Taxable securities...................... $12,114 $ 9,292 $3,394 ($ 572)
229,774 235,609 8.00% 7.78% Tax-exempt securities (1)............... 4,646 4,585 (116) 178
- --------------------------------------------------------------------------------------------------------------------------
$ 974,802 $ 774,179 6.80% 7.17% Total securities...................... $16,760 $13,877 $3,278 ($ 394)
- --------------------------------------------------------------------------------------------------------------------------
$ 10,463 $ 7,028 6.99% 8.65% Mortgage loans held for sale (3)........ $ 185 $ 152 $ 65 ($ 32)
1,291,853 1,174,331 8.76% 8.66% Loans (1) (2)........................... 28,621 25,435 2,601 585
15,636 8,947 4.93% 6.57% Other earning assets.................... 195 147 90 (42)
Fees on mortgage loans held for sale (3) 573 313 291 (31)
- --------------------------------------------------------------------------------------------------------------------------
$2,292,754 $1,964,485 7.99% 8.13% TOTAL EARNING ASSETS (FTE) $46,334 $39,924 $6,325 $ 86
- --------------------------------------------------------------------------------------------------------------------------
INTEREST BEARING LIABILITIES:
$ 427,375 $ 423,175 2.44% 2.56% Interest-bearing demand deposits........ $ 2,605 $ 2,668 $ 27 ($ 90)
158,346 167,485 2.36% 2.68% Savings deposits........................ 930 1,106 (60) (116)
942,075 880,566 5.85% 5.21% Time deposits........................... 13,734 11,313 846 1,575
- --------------------------------------------------------------------------------------------------------------------------
$1,527,796 $1,471,226 4.53% 4.16% Total interest-bearing deposits....... $17,269 $15,087 $ 813 $1,369
- --------------------------------------------------------------------------------------------------------------------------
$ 330,577 $ 208,800 5.47% 6.31% Short-term borrowings................... $ 4,507 $ 3,250 $1,731 ($ 474)
134,737 24,497 6.42% 7.65% Long-term borrowings.................... 2,156 462 1,800 (106)
5,273 4,802 8.29% 10.64% Other................................... 109 126 12 (29)
- --------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST-BEARING
$1,998,383 $1,709,325 4.83% 4.49% LIABILITIES........................... $24,041 $18,925 $4,356 $760
- --------------------------------------------------------------------------------------------------------------------------
3.16% 3.64% INTEREST RATE SPREAD (FTE)..............
- --------------------------------------------------------------------------------------------------------------------------
NET INTEREST MARGIN/
3.85% 4.28% NET INTEREST INCOME (FTE)............. $22,293 $20,999 $1,969 ($674)
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
The above table shows the changes in interest income (tax equivalent) and
interest expense attributable to rate and volume variances. The change in
interest income (tax equivalent) due to both rate and volume has been
allocated to rate and volume changes in proportion to the relationship of the
absolute dollar amounts of the change in each.
(1) The interest on tax-exempt investment securities and tax-exempt loans is
calculated on a tax equivalent basis assuming a federal tax rate of 35%.
(2) The balances of nonaccrual loans are included in average loans outstanding.
Interest on loans includes yield-related loan fees.
(3) The yield-related fees recognized from the origination of mortgage loans
held for sale are in addition to the interest earned on the loans during the
period in which they are warehoused for sale as shown above.
For the first quarter of 1996, total average earning assets were $2.29 billion,
representing an increase of 16.7% or $328.3 million over 1995. Average
securities increased $200.6 million or 25.9%, mainly due to the investment
leveraging program. Average loans also increased by $117.5 million or 10.0%,
primarily as a result of commercial and real estate loan growth. Average
mortgage loans held for sale increased $3.4 million over the prior year quarter
due to higher refinancing volumes as a result of lower mortgage rates in early
1996.
Average total interest-bearing liabilities grew from the first quarter of 1995
by 16.9% or $289.1 million. Average interest-bearing deposits rose by $56.6
million or 3.8% during the first quarter of 1996. The increase in average
interest-bearing deposits was due to a $61.5 million growth in average time
deposits. Average short-term borrowings increased $121.8 million in the first
quarter of 1996 when compared to a year earlier and average long-term borrowings
increased $110.2 million. These increases were due to the use of repurchase
agreements and FHLB borrowings for the funding of the investment leveraging
program. Average earnings assets as a percentage of total average assets was
92.9% and 91.6%, respectively, for the first quarters of 1996 and 1995. The
increase was a result of management's focus on reducing non-earning assets and a
17.0% increase in earning assets due to the leveraging strategy.
8
<PAGE> 9
The yield on average earning assets for the first quarter of 1996 was 7.99%, a
14 basis point decline over the same period in 1995. The average rate on
interest-bearing liabilities rose by 34 basis points to 4.83% when compared to
the first quarter of 1995. As a result, the net interest spread declined 48
basis points to 3.16% as compared to 3.64% in the prior year quarter.
The yield on loans for the first quarter of 1996 was 8.76%, a 10 basis point
increase over 1995. The yield on total securities dropped 37 basis points to
6.80% in comparison to the first quarter of 1995, due to accelerated paydowns
of mortgage-backed securities. Lower mortgage rates also affected the yield
on mortgage loans held for sale, which dropped 166 basis points to 6.99% in the
first quarter of 1996. Refinancing activity caused closed mortgage volumes to
double in comparison to the prior year quarter. The yield on other earning
assets was 4.93% in the first quarter of 1996, a decline of 164 basis points
from the previous year quarter due to the drop in rates earlier in 1996.
The average rate paid on interest-bearing deposits increased by 37 basis points
to 4.53% for the first quarter of 1996 due to higher time deposit rates
resulting from increased competition and a shift in deposit mix to higher rate
products. The rate paid on time deposits in the first quarter of 1996 was
5.85%, an increase of 64 basis points over 1995. Both interest-bearing demand
deposit rates and savings deposit rates, however, declined by 12 basis points
and 32 basis points, respectively.
The average rate paid on short-term borrowings was 5.47% as compared to 6.31%
for the first quarter of 1995, the decline due mainly to lower prevailing
short-term rates. The average rate paid on long-term borrowings also declined
from 7.65% to 6.42%. This decline was due to the lower rates associated with
FHLB borrowings, which have maturities of two to three years.
PROVISION AND ALLOWANCE FOR LOAN AND LEASE LOSSES
The provision for loan and lease losses for the first quarter of 1996 increased
$160,000 or 21.9%, to $889,000. Total net charge-offs for the quarter were
$695,000 as compared with $255,000 a year earlier, the increase due to
commercial real estate and consumer loan categories. The annualized ratio of
first quarter net charge-offs to average total loans and leases was .22% in
1996 and .09% in 1995. The provision for loan and lease losses increased in
1996 due to the higher level of net charge-offs and overall loan growth.
Non-performing loans totaled $11.5 million at March 31, 1996, a decline of
$1.4 million or 11.0% since December 31, 1995. Other real estate owned totaled
$890,000 at March 31, 1996, a decline of $1.2 million or 57.9% since December
31, 1995 due to the sale of a commercial real estate property. Total
non-performing assets were $12.4 million at the end of the first quarter of
1996, a decline of $1.3 million or 9.6% since March 31, 1995 and a decline of
$2.6 million or 17.6% since December 31, 1995.
The allowance for loan and lease losses as a percentage of non-performing loans
and leases at March 31, 1996 was 115.3% versus 109.1% a year earlier and 101.1%
at December 31, 1995. Total non-performing assets, as a percentage of loans,
leases and other real estate owned, was .95% at March 31, 1996, 1.15% at March
31, 1995 and 1.17% at December 31, 1995. The allowance as a percentage of
total net loans and leases was 1.02% at March 31, 1996, unchanged from December
31, 1995.
OTHER INCOME
Non-interest income, exclusive of security gains, totaled $8.2 million for the
first quarter of 1996, an increase of $763,000 or 10.3% over the first quarter
of 1995. Trust and asset management income increased by $299,000 or 10.2%,
while mortgage revenues rose by 30.7% or $172,000. Trust and asset management
income rose as a result of the favorable investment performance of trust assets
under administration and growth in the AMCORE Vintage Funds proprietary mutual
fund family. A drop in long-term interest rates earlier in 1996 resulted in
higher levels of refinancing, which increased mortgage revenues. Closed loan
volume for the first quarter of 1996 was $45.0 million, up $22.6 million or
101.4% from last year. Approximately 60% of the closed loan volume in 1996
related to refinancing activity. Higher collection fee income and insurance
commissions also contributed to the growth in non-interest income. Collection
fees increased $129,000 or 28.5% due to increased placement volumes. Insurance
commissions rose $66,000 or 35.1% as a result of continued growth at the
full-service insurance group.
Net security gains for the first quarter of 1996 were $764,000 as compared to
$619,000 a year earlier. All securities sold were from the available for sale
portfolio.
9
<PAGE> 10
OPERATING EXPENSES
Total operating expenses for the first quarter of 1996 were $21.0 million, an
increase of $315,000 or 1.5%, when compared to the first quarter of 1995. As
mentioned earlier, the elimination of FDIC deposit insurance premiums lowered
total insurance expense by $937,000 and helped to offset growth in the
operating costs. Without the impact of this item, total operating expenses
would have increased $1.3 million or 6.1%, mainly due to higher personnel costs
and equipment expenses, as discussed below.
Personnel costs, the largest component of total operating expenses, includes
compensation expense and employee benefits. This category totaled $11.9 million
and rose $601,000 or 5.3% over the first quarter of 1995. This increase was
primarily caused by normal salary adjustments and higher mortgage commissions.
For the first three months of 1996, total equipment expense was $1.9 million,
an increase of $241,000 or 14.7% over the same period a year earlier. This
increase was caused by branch expansion and the upgrade in information systems
hardware and software. In late 1995, a new teller automation product delivery
system was installed within all bank teller lines. In 1996, this delivery
system will be expanded throughout the entire customer service platform. This
will cause higher equipment costs in 1996, but is expected to improve
day-to-day efficiencies, enhance customer service and improve cross-selling
effectiveness.
Intangibles amortization expense totaled $512,000 in the first quarter of 1996,
a decline of $130,000 from 1995. This was due to lower levels of collection
agency intangible assets, which were reduced by the asset impairment charge
taken in the second quarter of 1995. Other expenses totaled $3.9 million in the
first quarter of 1996, an increase of $436,000 or 12.5% over the prior year
quarter. This category includes loan processing costs, printing and supplies,
communication expense, credit card expense, other real estate expense, external
data processing costs, correspondent bank fees, and other miscellaneous
expenses. The increase in 1996 was mainly caused by higher loan processing
costs both at the banks and at the mortgage company as a result of commercial
and real estate loan growth and the higher mortgage refinancing activity.
Income tax expense for the first quarter of 1996 totaled $2.0 million, a
$681,000 increase over the first quarter of 1995. This increase was due to the
higher level of earnings and approximately $300,000 in tax credits recorded in
the first quarter of 1995. Without the impact of these 1995 tax credits, the
effective tax rate for the first quarter of 1995 would have been 27.8% versus
26.6% in the first quarter of this year.
SUMMARY OF FINANCIAL CONDITION
Total assets at March 31, 1996 were $2.67 billion, a $254.7 million or 10.5%
increase since December 31, 1995. As mentioned earlier, loan growth and the
purchase of securities in connection with the investment leveraging program
accounted for much of the increase in total assets. At March 31, 1996, total
loans outstanding were $1.31 billion, an increase of $19.2 million or 1.5%
since the end of 1995. Total securities at March 31, 1996 were $1.16 billion
versus $908.7 million at the end of 1995, an increase of $249.0 million or
27.4%. The investment leveraging program, as described earlier, caused the
growth in the investment portfolio.
The funding for this program caused short-term borrowings to increase $165.0
million over the previous quarter-end to total $457.0 million at March 31,
1996. The increase FHLB borrowings also caused long-term borrowings to rise
$71.1 million over the end of 1995 to $178.9 million at March 31, 1996. Total
deposits at the end of the quarter were $1.80 billion, an increase of $18.4
million or 1.0% since year-end. A $42.1 million increase in interest bearing
deposits, particularly in certificates of deposit, partially offset a $23.7
million decrease in non-interest bearing deposits.
10
<PAGE> 11
CAPITAL
Stockholders' equity at March 31, 1996 was $206.7 million, a decline of 1.5% or
$3.2 million since December 31, 1995. This decline was caused by the unrealized
market value change of the securities available for sale portfolio. Without
this $6.7 million reduction in market value, net of tax, total stockholders'
equity would have increased $3.6 million or 1.7%. The risk-based capital ratio
was 13.36% at March 31, 1996 as compared to 13.26% at December 31, 1995. Tier 1
risk-based capital increased to 12.51% versus 12.40% at year-end. The leverage
ratio at the end of the first quarter was 7.90%, well above the required
minimum of 4.00%. Dividends per share for the first quarter of 1996 increased
by 6.7% to $.16 per share.
OTHER MATTERS
On April 10, 1996, the Company announced plans to combine four banks in the
southern region into one national bank charter. The banks in Princeton, Peru and
Gridley will be merged into the Mendota bank to form a new bank with assets
totaling approximately $425 million. This merger will increase operating
efficiencies and reduce costs. It will also result in providing improved
customer service and consistent product offerings for customers in this
economic region, which is in proximity to the intersection of Interstates I-39
and I-80. The merger is subject to regulatory approval and is expected to be
completed in the third quarter of 1996.
11
<PAGE> 12
PART II
ITEM 4. Submission of Matters to a Vote of Security Holders
(a) AMCORE Financial, Inc. 1996 Annual Meeting of Stockholders was held on
May 7, 1996.
(b) Proxies were solicited by AMCORE Financial, Inc. management for the
purposes of electing four Class I directors whose term will expire in
1999. The following individuals were elected as Class I directors:
Name Votes For Votes Withheld
- ---- ---------- --------------
Frank A. Fiorenza 11,685,603 45,794
Theresa Paulette Gilbert 11,679,788 51,609
Lawrence E. Gloyd 11,683,162 48,235
Robert J. Meuleman 11,685,915 45,482
(c) Proxies were solicited by AMCORE Financial, Inc. management to ratify the
appointment of McGladrey & Pullen, LLP as independent auditors. The appointment
of McGladrey & Pullen, LLP was ratified, via 11,652,401 votes for, 19,186 votes
against and 59,810 votes abstaining the ratification of the appointment.
ITEM 6. Exhibits and Reports of Form 10-Q Page
----
(a) 2 Agreement and Plan of Reorganization by and among AMCORE
Financial, Inc., NBM Acquisition, Inc. and NBM Bancorp, Inc.
(Incorporated by reference to the Company's Amendment No. 1 to
Form S-4 as filed with the Commission on February 23, 1995).
3 Amended and Restated Articles of Incorporation of AMCORE
Financial, Inc. dated May 1, 1990 (Incorporated by reference
to Exhibit 23 of AMCORE's Annual Report on Form 10-K for the
year ended December 31, 1989).
3.1 By-laws of AMCORE Financial, Inc. as amended May 17, 1990
(Incorporated by reference to Exhibit 3.1 of AMCORE's Annual
Report on Form 10-K for the year ended December 31, 1994).
4 Rights Agreement dated February 21, 1996, between AMCORE
Financial, Inc. and Firstar Trust Company (Incorporated by
reference to AMCORE's Form 8-K as filed with the Commission
on February 28, 1996).
10.1* 1995 Stock Incentive Plan (Incorporated by reference to
Exhibit 22 of AMCORE's Annual Report on Form 10-K for the year
ended December 31, 1994).
10.2* AMCORE Financial, Inc. 1994 Stock Option Plan for Non-Employee
Directors (Incorporated by reference to Exhibit 23 of AMCORE's
Annual Report on Form 10-K for the year ended
December 31, 1993).
10.3A* Transitional Compensation Agreement dated September 25, 1995
between AMCORE Financial, Inc. and Robert J. Meuleman
(Incorporated by reference to Exhibit 10.1 to AMCORE's
Form 10-Q for the quarter ended September 30, 1995).
10.3B* Transitional Compensation Agreement dated September 25, 1995
between AMCORE Financial, Inc. and John R. Hecht
(Incorporated by reference to Exhibit 10.2 to AMCORE's
Form 10-Q for the quarter ended September 30, 1995).
12
<PAGE> 13
10.3C* Transitional Compensation Agreement dated September 25, 1995
between AMCORE Financial, Inc. and F. Taylor Carlin
(Incorporated by reference to Exhibit 10.3 to AMCORE's
Form 10-Q for the quarter ended September 30, 1995).
10.3D* Transitional Compensation Agreement dated September 25, 1995
between AMCORE Financial, Inc. and James S. Waddell
(Incorporated by reference to Exhibit 10.4 to AMCORE's
Form 10-Q for the quarter ended September 30, 1995).
10.3E* Severance Agreement dated March 5, 1993 between AMCORE
Financial, Inc. and Charles E. Gagnier (Incorporated by
reference to Exhibit 10.2 to AMCORE's Annual Report
on Form 10-K for the year ended December 31, 1992).
10.3F* Severance Agreement dated March 5, 1993 between AMCORE
Financial, Inc. and Gerald W. Lister (Incorporated by
reference to Exhibit 10.3F to AMCORE's Annual Report
on Form 10-K for the year ended December 31, 1993).
10.4 Loan Agreement for $17,000,000 Term Loan and $25,000,000
Line of Credit Note dated November 10, 1995 with M&I
Marshall & Ilsley Bank (Incorporated by reference to Exhibit
10.5 to AMCORE's Annual Report on Form 10-K for the year
ended December 31, 1995).
10.5 Commercial Paper Placement Agreement dated November 10, 1995
with M&I Marshall and Ilsley Bank (Incorporated by reference
to Exhibit 10.6 to AMCORE's Annual Report on Form 10-K for
the year ended December 31, 1995).
10.6* Executive Insurance Agreement dated March 1, 1996 between 15
AFI and the following executives: Robert J. Meuleman, F.
Taylor Carlin and James S. Waddell.
11 Statement Re-Computation of Per Share Earnings 29
22 1996 Notice of Annual Meeting of Stockholders and Proxy
Statement (Incorporated by reference to Exhibit 22 of the
Company's Annual Report on Form 10-K for the year ended
December 31, 1995).
27 Financial Data Schedule 30
99 Additional exhibit - Earnings release dated April 24, 1996. 31
(b) One Form 8-K was filed during the quarter in connection with
the renewal of AMCORE's Rights Agreement, as mentioned in
Item (a)4 above.
*These Exhibits are management contracts or compensatory plans or arrangements
required to be filed as exhibits to this Form 10-Q.
13
<PAGE> 14
SIGNATURES
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 thereunto duly authorized.
AMCORE Financial, Inc.
(Registrant)
Date: May 15, 1996
/s/ John R. Hecht
--------------------------------
John R. Hecht
Senior Vice President and Chief Financial Officer
(Duly authorized officer of the registrant
and principal financial officer)
14
<PAGE> 1
EXHIBIT 10.6
EXECUTIVE INSURANCE AGREEMENT
The attached Executive Insurance Agreement was issued March 1, 1996 between
AMCORE Financial, Inc. and the following executives:
Robert J. Meuleman
F. Taylor Carlin
James S. Waddell
<PAGE> 2
EXECUTIVE INSURANCE
AGREEMENT
- --------------------------------------------------------------------------------
This Agreement is made this 1st day of , 1996, by and between Amcore
Financial, Inc., having its principal place of business in Rockford, Illinois
(the "Corporation"), and (the "Executive").
WITNESSETH
WHEREAS, the Executive is a valued employee of the Corporation; and
WHEREAS, the Corporation wishes to assist the Executive with his or her personal
life insurance program both as an inducement to the Executive's continued
employment and in recognition of the Executive's ongoing valuable contribution
to the business success of the Corporation; and
WHEREAS, the Executive is the owner of an insurance policy on his or her life,
including all supplemental riders or endorsements to such insurance policy,
which policy the Executive and Corporation wish to make subject to a life
insurance plan pursuant to the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants set
forth below, the Corporation and Executive agree as follows:
ARTICLE I
OWNERSHIP OF THE POLICY
1.1 EXECUTIVE AS OWNER.
The Executive shall be the owner of the policy (including all supplemental
riders or endorsements) (the "Policy") and may exercise all ownership rights
granted to the owner by the terms of the Policy, except as may otherwise be
provided in this Agreement. The Executive and the Corporation agree that the
Policy shall be subject to the terms and conditions of this Agreement.
<PAGE> 3
1.2 ASSIGNMENT.
The Executive agrees to execute an assignment (the "Assignment") to the
Corporation to secure the Corporation's rights under this Agreement, in the
form required by or acceptable to the issuer of the Policy (the "Issuer"), a
copy of which is attached as Exhibit 1. The Assignment shall set forth the
rights of the Corporation in and with respect to the Policy pursuant to the
terms and conditions of this Agreement. The Executive and the Corporation agree
to be bound by the terms of the Assignment.
1.3 CORPORATION'S RIGHTS.
The Corporation's rights with respect to the Policy shall be limited to the
following:
(a) The sole right to obtain one or more loans or advances against the
cash surrender value of the Policy; however, such loans shall be limited
to the amount set forth in Section 4.3 below (the "Corporate Interest");
(b) The sole right to pledge or assign the Corporate Interest as security
for loans or advances;
(c) The right to fully or partially surrender the Policy upon termination
of the Agreement;
(d) The sole right to realize up to the Corporate Interest in the cash
surrender value of the Policy on the full or partial surrender of the
Policy;
(e) The right to exercise all non-forfeiture or lapse option rights
permitted by the terms of the Policy;
(f) The right to realize the proceeds of the Policy as set forth in
Section 3.2 below (the "Corporation's Death Benefit Portion") upon the
Executive's death; and
(g) The right to release the Assignment upon receipt of the Corporate
Interest.
1.4 EXECUTIVE'S RIGHTS.
The Executive shall retain all other rights as owner of the Policy, including,
but not limited to, the following:
(a) The right to designate and to change the beneficiary or beneficiaries
on the portion of the proceeds of the Policy payable to the Executive's
beneficiary pursuant to subsection 3.1 below (the "Executive's Death
Benefit Portion") upon the Executive's death;
(b) The right to elect any optional form of settlement available with
respect to the Executive's Death Benefit Portion; and
<PAGE> 4
(c) The right to assign the Executive's rights in and with respect to the
Policy, including the right to assign ownership of the Policy to a third
party.
However, before the date the Corporation receives the Corporate Interest under
the terms of Article IV, the Executive shall not have the right to obtain a
loan or advance against the cash surrender value of the Policy, or to fully or
partially surrender the Policy.
ARTICLE II
INSURANCE PREMIUMS
2.1 AMOUNT OF PREMIUM.
For purposes of this Agreement, the term "premium" shall mean the yearly
premium necessary to provide a life insurance benefit at least equal to the
Executive's Death Benefit Portion (as defined in Section 3.1). "Premium" shall
also include all costs associated with all supplemental riders and endorsements
to the policy.
2.2 PAYMENT OF PREMIUM.
The Corporation shall pay the premium on the Policy to the Issuer on or before
the due date of each premium payment, and in any event, not later than the
expiration of the grace period under the Policy for the premium payment. The
Corporation shall furnish the Executive with written notice of payment.
If the Corporation fails to make any premium payment within 20 days after its
due date, the Executive may make the premium payment. If the Executive makes
the premium payment, the Corporation shall reimburse the Executive for the
premium within ten days after the Executive makes the premium payment.
The Corporation reserves the right to require the Executive to pay a portion of
the premium or to reimburse the Corporation for part of the premium. However,
the amount of premium the Executive may be required to pay or reimburse shall
be limited to the amount that otherwise would be treated as taxable income
under Section 2.3.
2.3 TAX CONSEQUENCES TO THE EXECUTIVE.
In the event that the Corporation's payment of any premium is deemed to be
taxable income to the Executive pursuant to any applicable tax law or
regulation, the Corporation shall furnish the Executive with written notice of
the amount of such taxable income. The written notice shall be provided on or
before January 31 following the year during which the premium is paid. At the
Corporation's election, the notice may be provided using IRS Form W-2.
<PAGE> 5
Under current tax law, the Executive will be deemed to have taxable income
equal to the amount of the annual cost of the pure insurance protection on the
life of the Executive under the Policy for the ensuing policy year. The
additional taxable income shall be equal to the lesser of the following:
(a) That rate per $1,000 of pure insurance protection promulgated by the
Internal Revenue Service in Rev. Rul. 55-747, 1955-2 C.B. 228, as the same
may be amended or replaced from time to time by published ruling (the
"PS-58 rate") as applied to such amount of pure insurance protection
provided to the Executive pursuant to the terms of this Agreement; or
(b) That current published rate per $1,000 of pure insurance protection
charged by the Issuer for initial-issue individual one-year term insurance
policies available to all standard risks as applied to such amount of pure
insurance protection provided to the Executive pursuant to the terms of
this Agreement.
2.4 PAYMENT TO THE EXECUTIVE.
The Corporation shall increase the Executive's compensation by the amount of
any premium paid by the Executive pursuant to Section 2.2.
ARTICLE III
RIGHTS UPON DEATH OF EXECUTIVE
3.1 EXECUTIVE'S DEATH BENEFIT PORTION.
Upon the death of the Executive, the Executive's designated beneficiary or
beneficiaries shall be entitled to receive the Executive's Death Benefit
Portion. The Executive's Death Benefit Portion shall be an amount equal to
$1,000,000 while remaining an active employee.
3.2 CORPORATION'S DEATH BENEFIT PORTION.
Upon the death of the Executive, the Corporation shall be entitled to receive
an amount equal to the Corporation's Death Benefit Portion. The Corporation's
Death Benefit Portion shall be an amount equal to the remaining net death
benefit under the Policy after paying the Executive's Death Benefit Portion.
3.3 BENEFICIARY DESIGNATION.
The Executive and the Corporation agree to conform the beneficiary designation
of the Policy to the provisions of this Agreement.
<PAGE> 6
ARTICLE IV
TERMINATION OF AGREEMENT
4.1 TERMINATION DEFINED.
The Corporation reserves the right to terminate this Agreement for any reason.
This Agreement shall automatically terminate upon the occurrence of any of the
following events:
(a) The bankruptcy, receivership or dissolution of the Corporation.
(b) The Executive's retirement from the Corporation; provided, however, if
the retirement occurs within ten years after the date the Policy was
issued or before an amount equal to the Corporate Interest can be
withdrawn from the policy without incurring tax under the Code Section
7702(f)(7) the following applies:
(i) If the Executive waives all post-retirement life insurance
benefits from the Corporation, the Executive's retirement shall be the
termination event
(ii) If the Executive does not waive all post-retirement life
insurance benefits from the Corporation, the termination event shall
be the latest of the tenth anniversary of the date the Policy was
issued or the Policy anniversary following the final premium payment
before an amount equal to the Corporate Interest can be withdrawn from
the Policy without incurring tax under Code Section 7702(f)(7).
(c) The termination of employment of the Executive with the Corporation
(other than by reason of death or retirement).
(d) The mutual written agreement of the Executive and the Corporation.
Notwithstanding anything to the contrary in this Agreement, the Corporation may
terminate this Agreement with regard to the Executive for any reason.
The term "retirement" in this Section means a termination of employment with
the Corporation after satisfying the requirements for an early or normal
retirement. Also, if the Executive is receiving long-term disability benefits
under a plan sponsored by the Corporation, the Executive shall not be deemed to
have terminated employment with the Corporation.
<PAGE> 7
4.2 RIGHTS UPON TERMINATION.
Upon termination of this Agreement, the Executive shall pay to the Corporation
the amount determined pursuant to Section 4.3 below. Upon receipt of such
amount from the Executive, the Corporation shall take all steps necessary to
release the Assignment so that the Executive (or his assignee as owner of the
Policy) shall own the Policy free of all encumbrances in favor of the
Corporation required by this Agreement. The Executive (or his assignee) may
then take any action with regard to the Policy that is available under the
terms of the Policy to the Policy's owner.
4.3 CORPORATE INTEREST.
For purposes of this Agreement, the term "Corporate Interest" means an amount
payable from the cash surrender value of the Policy equal to the cumulative
amount of all premiums paid, without interest. However, the Corporate Interest
shall be decreased by the sum of any indebtedness described in Section 1.3(a)
and the surrender charges, if any, imposed by the Issuer. In no event shall the
Corporate Interest exceed the amount of the Policy's cash surrender value.
The Corporate Interest shall be paid by the Executive as specified in Section
4.2 above or by the Issuer upon surrender of the Policy.
ARTICLE V
ADMINISTRATIVE PROVISIONS
5.1 NO OTHER LIFE INSURANCE PROVIDED BY CORPORATION.
The Corporation shall have no obligation to provide the Executive with life
insurance benefits, either during employment by the Corporation or after
retirement, other than pursuant to this Agreement.
5.2 ISSUER'S RESPONSIBILITY.
The Issuer shall not be considered a party to this Agreement. No provision of
this Agreement shall in any way change the obligations of the Issuer as
expressly provided in the Policy, except as the Agreement may become a part of
the Policy by the Issuer's acceptance of the Assignment.
5.3 AMENDMENT.
This Agreement may be amended only by a written agreement signed by both the
Executive and a duly authorized representative of the Corporation.
<PAGE> 8
5.4 NOTICE.
Any and all notices required to be given under the terms of this Agreement
shall be given in writing and signed by the appropriate party, and shall be
sent by certified mail, postage prepaid, to the appropriate address set forth
below:
(a) To the Executive at:
-----------------------
-----------------------
-----------------------
-----------------------
To the Corporation at:
Amcore Financial, Inc.
501 7th Street
P. O. Box 1537
Rockford, IL 61110-0037
Attention: Secretary
5.5 HEIRS, SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon and shall inure to the benefit of (i) the
Executive, his or her successors, heirs and the executors or administrators of
the Executive's estate, and (ii) the Corporation and its successors. The
Executive and the Corporation agree that either party may assign its interest
under this Agreement upon the prior written consent of the other party, and any
assignee shall be bound by the terms and conditions of this Agreement as if an
original party to the Agreement.
5.6 INTERPRETATION.
This Agreement shall be governed by and construed in accordance with the laws
of the State of Illinois.
5.7 TERMS.
This Agreement shall be effective as of the date first above written, and shall
continue until terminated as provided in Section 4.1 or until all covenants
under the Agreement contingent upon the death of the Executive are fully
carried out.
5.8 HEADINGS.
Any headings or captions in this Agreement are for reference purposes only, and
shall not change or affect the meaning of any provision of this Agreement.
<PAGE> 9
5.9 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original, and all of which together shall constitute one and
the same Agreement.
5.10 EMPLOYMENT RIGHTS.
The existence of this Agreement shall not grant Executive any legal right to
continue as an employee of the Corporation nor affect the right of the
Corporation to discharge the Executive.
5.11 FIDUCIARY.
The Corporation shall be the named Fiduciary and administrator (the
"Fiduciary") of the split-dollar arrangement established pursuant to this
Agreement. The Fiduciary shall have full power to administer this Agreement,
and the Fiduciary's actions with respect hereto shall be binding and conclusive
upon all persons for all purposes; subject to Section 5.12. The Fiduciary shall
not be liable to any person for any action taken or omitted in connection with
its responsibilities, rights and duties under this Agreement unless
attributable to willful misconduct or lack of good faith.
5.12 CLAIMS PROCEDURE.
The parties understand and agree that the Fiduciary has no authority or
control over the claims procedures of the insurance company which issues the
Policy. Any delay or denial of a claim by the Insurer shall not be controlled
by the following claims procedure.
Any controversy or claim arising out of or relating to this Agreement shall be
filed with the Fiduciary, which shall make all determinations concerning the
claim. Any decision by the Fiduciary denying the claim shall be in writing and
shall be delivered to all parties in interest in accordance with the notice
provisions of Section 5.4. The decision shall set forth the reasons for denial
in plain language. Pertinent provisions of the Agreement shall be cited and,
where appropriate, an explanation as to how the Executive can perfect the claim
will be provided. This notice of denial of benefits shall be provided within 90
days of the Fiduciary's receipt of the Executive's claim for benefits. If the
Fiduciary fails to notify the Executive of its decision regarding his claim
within the 90 day period, the claim shall be considered denied, and the
Executive shall then be permitted to proceed with his appeal as provided in
this Section.
An Executive who has been completely or partially denied a benefit shall be
entitled to appeal this denial of his claim by filing a written statement of
his position with the Fiduciary no later than 60 days after receipt of the
written notification of the claim denial. The Fiduciary shall schedule an
opportunity for a full and fair review of the issue within 30 days after
receipt of the appeal.
<PAGE> 10
Following its review of any additional information submitted by the Executive,
either through the hearing process or otherwise, the Fiduciary shall render a
decision on its review of the denied claim in the following manner:
(a) The Fiduciary shall make its decision regarding the merits of the
denied claim within 60 days following its receipt of the request for
review (or within 120 days after receipt, in a case where there are
special circumstances requiring extension of time for reviewing the
appealed claim). The Fiduciary shall deliver the decision to the claimant
in writing.
If an extension of time for reviewing the appealed claim is required
because of special circumstances, written notice of the extension shall be
furnished to the Executive prior to the commencement of the extension. If
the decision on review is not furnished within the prescribed time, the
claim shall be deemed denied on review.
(b) The decision on review shall set forth specific reasons for the
decision, and shall cite specific references to the pertinent Agreement
provisions on which the decision is based.
IN WITNESS OF WHICH, the Corporation and Executive have duly executed this
Agreement.
AMCORE FINANCIAL, INC.
By
---------------------
Its
---------------------
THE EXECUTIVE
------------------------
------------------------
(Name of Executive)
<PAGE> 11
COLLATERAL ASSIGNMENT OF SPLIT-DOLLAR POLICY
This Assignment is made this 1st day of__________, 1996, by the undersigned
(herein called Owner), to Amcore Financial, Inc. an Illinois Corporation
(herein called Corporation), its successors and assigns.
1. The subject of this Assignment is a certain life insurance policy No.____,
issued by the_______________________ (herein called the Insurer).
2. The Policy is subject to a Collateral Assignment Split-Dollar Agreement
(herein called Agreement) dated_____________, between the Corporation and
__________. The Agreement was created to assist_____________ with his/her
personal life insurance program as an employee benefit for a valued key
employee. Such Agreement is hereby incorporated into and made a part of
this Assignment.
3. The Owner hereby assigns, transfers, and sets over to the Corporation the
following specific limited rights in the Policy, and subject to the
following terms and provisions:
(a) This assignment is made, and the Policy is held as collateral security
for the premium advances to the Owner, now existing or hereafter made
by the Corporation under the terms of the Agreement.
(b) The Corporation's rights in the Policy are to the extent of its
interest in the Policy as stated in Section 1.3 of the attached Split
Dollar Agreement.
4. The Corporation shall have a right to obtain from the Insurer one or more
loans or advances against its interest in the cash surrender values of the
Policy.
(a) The Corporation shall be responsible for the payment of interest on
any such loans by the Corporation against such cash surrender values
of the Policy during the term of the Agreement.
(b) Such loans or withdrawals made by the Corporation against (or from)
the cash surrender values of the Policy shall be treated as repayments
of the Corporation's premium advances by the Owner.
(c) Premium payments paid as a result of a Waiver of Premium Rider shall
be included as premium paid by the Corporation only in the event the
Corporation in fact paid the waiver of premium charge.
<PAGE> 12
5. The Corporation shall have the right to be repaid to the extent of its
interest:
(a) in the event of the death of the insured on the Policy;
(b) in the event the Policy is lapsed, canceled or surrendered by the
Owner; or
(c) in the event of the termination of the Split Dollar Agreement.
6. The Corporation's rights with respect to the Policy shall be limited to
the following:
(a) The sole right to obtain one or more loans or advances against the
cash surrender value of the Policy; however, such loans shall be
limited to the Corporate Interest as defined in Section 4.3 of the
Agreement;
(b) The sole right to pledge or assign the Corporate Interest as security
for loans or advances;
(c) The right to fully or partially surrender the Policy upon termination
of the Agreement;
(d) The sole right to realize up to the Corporate Interest in the cash
surrender value of the Policy on the full or partial surrender of the
Policy;
(e) The right to exercise all non-forfeiture or lapse option rights
permitted by the terms of the Policy;
(f) The right to realize the proceeds of the Policy as set forth in
Section 3.2 of the Agreement (the "Corporation's Death Benefit
Portion") upon the Executive's death; and
(g) The right to release the Assignment upon receipt of the Corporate
Interest.
<PAGE> 13
7. The Owner shall retain all other rights as owner of the Policy,
including, but not limited to, the following:
(a) The right to designate and to change the beneficiary or beneficiaries
on the portion of the proceeds of the Policy payable to the
Executive's beneficiary pursuant to subsection 3.1 of the Agreement
(the "Executive's Death Benefit Portion") upon the Executive's death;
(b) The right to elect any optional form of settlement available with
respect to the Executive's Death Benefit Portion; and
(c) The right to assign the Owner's rights in and with respect to the
Policy, including the right to assign ownership of the Policy to a
third party.
However, before the date the Corporation receives the Corporate
Interest under the terms of Article IV of the Agreement, the Owner
shall not have the right to obtain a loan or advance against the cash
surrender value of the Policy, or to fully or partially surrender the
Policy.
8. The Insurer shall:
(a) have no duty or obligation to inquire into or investigate the reason
or validity of the Corporation's request to exercise any of its rights
hereunder, or whether the Owner has notice of it. The Insurer may
treat any such request by the Corporation as an affirmation that the
request conforms to this Assignment and the Agreement, and is thereby
authorized to act upon such request;
(b) be fully protected in recognizing a request by the Owner to exercise
any right of ownership, whether or not the Corporation has notice of
such request including but not limited to the right to surrender the
Policy.
9. Upon request, the Corporation shall forward the Policy to the Insurer
for endorsement of any designation or change of the
Policy beneficiary, or any election of an optional plan for payment
of the proceeds. The Corporation shall forward the Policy for these
purposes without unreasonable delay.
10. The exercise of any right given herein to the Corporation, or retained by
the Owner shall be solely at the option of each party respectively, and
shall not require notice or consent of one party to the other.
<PAGE> 14
11. The Corporation shall release and reassign all of its specific rights in
the Policy transferred by this Assignment upon repayment of the Corporate
Interest (as defined in Section 4.3 of the Agreement) without unreasonable
delay.
12. The Insurer is not a party to this Assignment.
IN WITNESS WHEREOF, this Assignment is hereby executed this ___________ day of
_______________, 1996.
____________________________ _________________________________
(Witness) (Owner)
<PAGE> 1
AMCORE FINANCIAL, INC. AND SUBSIDIARIES
EXHIBIT 11
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Quarter Ended March 31,
(in 000's) 1996 1995
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
PRIMARY EARNINGS PER SHARE:
EARNINGS
Income applicable to common stock $5,630 $4,617
SHARES
Weighted average number of common shares 14,192 14,049
Dilutive effect of outstanding options (as
determined by application of the treasury
stock method) 197 191
------- -------
Weighted average number of shares, as adjusted 14,389 14,240
======= =======
PRIMARY EARNINGS PER SHARE* $0.391 $0.324
======= =======
FULLY DILUTED EARNINGS PER SHARE:
EARNINGS
Income applicable to common stock $5,630 $4,617
SHARES
Weighted average number of shares, as adjusted
per primary computation above 14,389 14,240
Additional dilutive effect of outstanding options
(as determined by application of the treasury
stock method) - -
------- -------
Weighted average number of shares, as adjusted 14,389 14,240
======= =======
FULLY DILUTED EARNINGS PER SHARE* $0.391 $0.324
======= =======
</TABLE>
* This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although not required by footnote 2 to paragraph 14 of APB
Opinion No. 15 because it results in dilution of less than 3%.
-27-
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 96,365
<INT-BEARING-DEPOSITS> 316
<FED-FUNDS-SOLD> 2,265
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,152,141
<INVESTMENTS-CARRYING> 16,818
<INVESTMENTS-MARKET> 16,916
<LOANS> 1,305,115
<ALLOWANCE> 13,255
<TOTAL-ASSETS> 2,673,272
<DEPOSITS> 1,796,111
<SHORT-TERM> 457,049
<LIABILITIES-OTHER> 34,540
<LONG-TERM> 178,893
0
0
<COMMON> 4,976
<OTHER-SE> 201,703
<TOTAL-LIABILITIES-AND-EQUITY> 2,673,272
<INTEREST-LOAN> 28,550
<INTEREST-INVEST> 15,134
<INTEREST-OTHER> 953
<INTEREST-TOTAL> 44,637
<INTEREST-DEPOSIT> 17,269
<INTEREST-EXPENSE> 24,041
<INTEREST-INCOME-NET> 20,596
<LOAN-LOSSES> 889
<SECURITIES-GAINS> 764
<EXPENSE-OTHER> 20,988
<INCOME-PRETAX> 7,673
<INCOME-PRE-EXTRAORDINARY> 5,630
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,630
<EPS-PRIMARY> .40
<EPS-DILUTED> .40
<YIELD-ACTUAL> 3.85
<LOANS-NON> 9,744
<LOANS-PAST> 1,523
<LOANS-TROUBLED> 1,757
<LOANS-PROBLEM> 21,867
<ALLOWANCE-OPEN> 13,061
<CHARGE-OFFS> 1,017
<RECOVERIES> 322
<ALLOWANCE-CLOSE> 13,255
<ALLOWANCE-DOMESTIC> 10,086
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 3,169
</TABLE>
<PAGE> 1
News Release
Date: April 24, 1996
Contact: Ben Rubendall
815-961-7164
[AMCORE LETTERHEAD]
AMCORE REPORTS RECORD 1ST QUARTER EARNINGS
ROCKFORD, ILL. - AMCORE Financial, Inc. posted record first quarter
earnings of $5.6 million, or 40 cents per share for the period ended March 31,
1996 up 21.9 percent compared with $4.6 million or 33 cents per share in the
same period of 1995.
Net interest income for the quarter was $20.6 million, up 6.5 percent,
from $19.3 million in the same quarter of 1995 as a result of a 10 percent
increase in average loans and a 28 percent increase in average securities.
The net interest margin, however, fell 43 basis points to 3.85 percent,
down from 4.28 percent in the 1995 quarter. The decline in the margin was
primarily due to an investment leveraging program, which is designed to better
deploy underutilized capital and improve the return on equity. While this
program results in additional net interest income, it also lowers the net
interest margin due to the smaller interest rate spread.
"We continue to see an improvement in the quality of our loan portfolio,
said Robert J. Meuleman, president and chief executive officer. Total
non-performing loans were down 8.9 percent, or $1.1 million, despite a 9.7
percent increase in the total loan portfolio. Non-performing loans as a
percentage of total loans were .88 percent, down from 1.06 percent at the end
of the 1995 quarter."
The reserve for loan losses was 115 percent of non-performing loans, an
improvement from 109 percent in the 1995 quarter. Non-performing assets were
down $1.3 million, or 9.6 percent from the previous year. Non-performing assets
were .95 percent of total loans and other real estate, down from 1.15 percent
in the 1995 quarter. "This is the first time our non-performing assets have
been below 1 percent for several years," said Meuleman.
Fee-based income for the quarter was up 10.3 percent, or $763,000,
excluding security gains. Much of the increase was due to an 10.2 percent
increase in trust revenues and a 30.7 percent increase in mortgage revenues.
The higher trust revenues resulted from the favorable investment performance of
trust assets. Mortgage revenues rose due to increased refinancing activity
early in the quarter, when lower interest rates generated higher loan volumes.
Total operating expenses for the quarter were up 1.5 percent or $315,000,
from the 1995 quarter. The increase was mostly due to higher mortgage
commissions and the installation of teller automation systems, offset in part
by the reduction in FDIC insurance premiums.
-more-
<PAGE> 2
AMCORE Financial, Inc.
First Quarter Earnings 1996
Page 2
The efficiency ratio, which measures operating expenses as a percentage of
total revenues, was 67.2 percent, down from 71.2 percent in the first quarter
of 1995.
"We are very pleased with the improvement in our efficiency ratio,
Meuleman said. "This improvement reflects the impact of our continuing efforts
to both hold the line on expenses and increase our sources of revenue.
"To reach this objective, we have set two goals for ourselves: First, we
are committed to providing the best possible customer service, and second, we
are focusing on significant improvement in our operating results.
"In order to achieve these results, we are making a number of changes in
our operations including the combination of four banks in the southern part of
our service area to form a single institution with $425 million in assets and a
service area that more closely matches the economic region served by the
banks," Meuleman said.
"Progress continues with the installation of our new hardware and
software. The modernization of our processing functions is nearly complete, and
we have implemented a new teller automation system that has already improved
our ability to cross-sell additional products to customers and also reduce
operating expenses by cutting paperwork and shortening processing time.
"On the revenue side, we have been pleased with the performance and
improved profitability of our consumer finance company. It has refocused its
efforts on providing retail financing of equipment through agreements with
wholesale distributors.
"Our AMCORE Vintage family of mutual funds continues to grow rapidly,
including our newest fund, the Aggressive Growth Equity Fund. Nearly $600
million has now been invested in the Vintage mutuals," Meuleman said.
Return on equity was 10.77 percent up from 9.94 percent in the first
quarter of 1995. The return on assets was .92 percent, up from .87 percent in
1995.
All prior year financial information has been restated to reflect the
merger with NBM Bancorp, Inc.
AMCORE Financial, Inc. is a northern Illinois-based bank holding company
with assets of approximately $2.67 billion. Its holdings include eight
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".
AMCORE Financial may be reached on the Internet at: HTTP://www.amcore.com/
###
<PAGE> 3
AMCORE FINANCIAL, INC.
CONSOLIDATED KEY FINANCIAL DATA SUMMARY
NOTE: All prior year amounts have been restated to reflect the merger with
NBM Bancorp, Inc. This merger was accounted for under the pooling of
interests method.
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT SHARE DATA) QUARTER ENDED MAR. 31, TRAILING TWELVE MONTHS ENDED MAR. 31,
-------------------------------- --------------------------------------
PERCENT PERCENT
FINANCIAL HIGHLIGHTS 1996 1995 CHANGE 1996 1995 CHANGE
- ------------------------------------------------------------------------------------ --------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net revenues, including security gains.............. $29,550 $27,381 7.9% $115,588 $109,552 5.5%
Operating expenses.................................. 20,988 20,673 1.5% 87,755 79,966 9.7%
Net income.......................................... 5,630 4,617 21.9% 19,284 21,086 -8.5%
Net income per share................................ 0.40 0.33 21.2% 1.37 1.50 -8.7%
Cash dividends per share............................ 0.16 0.13 23.1% 0.61 0.55 10.9%
Book value per share................................ 14.55 13.67 6.4%
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED MAR. 31,
---------------------------------------
PERCENT
KEY FINANCIAL RATIOS 1996 1995 CHANGE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Return on average assets................................. 0.92% 0.87% 5.0%
Return on average equity................................. 10.77% 9.94% 8.4%
Net interest margin (FTE)................................ 3.85% 4.28% -10.0%
Net operating expense/average assets..................... 1.96% 2.39% -17.9%
Average total equity to average assets................... 8.51% 8.79% -3.1%
Other income/net revenues (1)............................ 28.5% 27.8% 2.5%
Efficiency Ratio (FTE)................................... 67.2% 71.2% -5.6%
<S> <C> <C> <C>
INCOME STATEMENT
- ------------------------------------------------------------------------------------------------------
Interest income..................................... $44,637 $38,260 16.7%
Interest expense.................................... 24,041 18,925 27.0%
--------------------------------------
Net interest income.............................. 20,596 19,335 6.5%
Provision for loan losses........................... 889 729 21.9%
Other Income:
Trust and asset management income................ 3,242 2,943 10.2%
Service charges on deposits...................... 1,680 1,732 -3.0%
Mortgage revenues................................ 733 561 30.7%
Collection fee income............................ 582 453 28.5%
Other............................................ 1,953 1,738 12.4%
--------------------------------------
Total other income............................ 8,190 7,427 10.3%
Net security gains.................................. 764 619 23.4%
Operating expenses:
Personnel costs.................................. 11,926 11,325 5.3%
Net occupancy expense............................ 1,385 1,366 1.4%
Equipment expense................................ 1,879 1,638 14.7%
Insurance expense................................ 197 1,134 -82.6%
Professional fees................................ 608 567 7.2%
Amortization of intangible assets................ 512 642 -20.2%
Other............................................ 4,481 4,001 12.0%
--------------------------------------
Total operating expenses...................... 20,988 20,673 1.5%
--------------------------------------
Income before income taxes.......................... 7,673 5,979 28.3%
Income taxes........................................ 2,043 1,362 50.0%
--------------------------------------
Net income.................................... $5,630 $4,617 21.9%
======================================
Average shares outstanding (000).................... 14,192 14,046 1.0%
Ending shares outstanding (000)..................... 14,200 14,062 1.0%
</TABLE>
<PAGE> 4
AMCORE Financial, Inc.
<TABLE>
<CAPTION>
QUARTER ENDED MAR. 31,
(in thousands) 1996 1995
- ---------------------------------------------------------------- -----------------------------------------------------
ENDING AVERAGE YIELD/ AVERAGE YIELD/
BALANCE BALANCE RATE BALANCE RATE
- ---------------------------------------------------------------- -----------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Taxable securities........................ $901,464 $741,786 6.46% $525,320 6.93%
Tax-exempt securities (FTE)............... 256,177 229,774 8.00% 235,609 7.78%
Other earning assets...................... 2,581 18,878 4.09% 22,197 6.13%
Mortgage loans held for sale.............. 11,318 10,463 6.99% 7,028 8.65%
Loans, net of unearned income (FTE)....... 1,305,115 1,291,853 8.76% 1,174,331 8.66%
---------- -----------------------------------------------------
Total Earning Assets................... $2,476,655 $2,292,754 7.99% $1,964,485 8.13%
Intangible assets...................... 13,793 14,107 18,046
Other non-earning assets............... 180,333 162,286 162,193
---------- -----------------------------------------------------
Total Assets........................... $2,670,781 $2,469,147 $2,144,724
========== =====================================================
LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest bearing deposits................. $1,554,570 $1,527,796 4.53% $1,471,226 4.16%
Non-interest bearing deposits............. 241,541 236,604 231,648
---------- -----------------------------------------------------
Total Deposits......................... $1,796,111 $1,764,400 $1,702,874
---------- -----------------------------------------------------
Short-term borrowings..................... 457,049 330,577 5.47% 208,800 6.31%
Long-term borrowings...................... 178,893 134,737 6.42% 24,497 7.65%
Other..................................... 5,301 5,273 8.29% 4,802 10.64%
---------- -----------------------------------------------------
Total Interest Bearing Liabilities..... 2,195,813 1,998,383 4.83% 1,709,325 4.49%
Other liabilities...................... 26,748 23,979 15,299
---------- -----------------------------------------------------
Total Liabilities...................... $2,464,102 $2,258,966 $1,956,272
Stockholders' Equity................... 206,679 210,181 188,452
---------- -----------------------------------------------------
Total Liabilities and
Stockholders' Equity................... $2,670,781 $2,469,147 $2,144,724
========== =====================================================
</TABLE>
<TABLE>
<CAPTION>
------------------------------------
QUARTER ENDED DEC. 31,
------------------------------------
PERCENT
ASSET QUALITY (IN THOUSANDS) 1996 1995 CHANGE
- ------------------------------------- ------------------------------------
<S> <C> <C> <C>
Ending allowance for loan losses.......................................... $13,255 $13,775 -3.8%
Net charge-offs........................................................... 695 255 172.5%
Net charge-offs to average loans (2)...................................... 0.22% 0.09% 144.4%
Non-performing assets:
Nonaccrual............................................................. $9,744 $10,575 -7.9%
Restructured........................................................... 1,757 2,050 -14.3%
------------------------------------
Non-performing loans................................................ 11,501 12,625 -8.9%
Other real estate owned (OREO)......................................... 890 1,084 -17.9%
------------------------------------
Total non-performing assets......................................... $12,391 $13,709 -9.6%
====================================
Key Asset Quality Ratios
Allowance to ending loans.............................................. 1.02% 1.16% -12.3%
Allowance to non-performing loans...................................... 115.3% 109.1% 5.6%
Non-performing loans to loans.......................................... 0.88% 1.06% -17.0%
Non-performing assets to loans & OREO.................................. 0.95% 1.15% -17.6%
Capital Adequacy
------------------------------------
Total risk-based capital............................................... 13.36% 13.26% 0.8%
Tier 1 risk-based capital.............................................. 12.51% 12.40% 0.9%
Leverage ratio......................................................... 7.90% 8.14% -2.9%
</TABLE>
Footnotes
(1) Excluding net security gains.
(2) On an annualized basis.
