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 June 30, 1997
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 July 31, 1997 was 17,902,012 shares.
Index of Exhibits on Page 21 Page 1
<PAGE>
AMCORE FINANCIAL, INC.
Form 10-Q Table of Contents
PART I Page Number
- ------ -----------
ITEM 1 Financial Statements
Consolidated Balance Sheets as of June 30, 1997 and
December 31, 1996 . . . . . . . . . . . . . . . . 3
Consolidated Statements of Income for the Three
and Six Months Ended June 30, 1997 and 1996 . . . . 4
Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 1997 and 1996 . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . 6
ITEM 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . 9
PART II
- -------
ITEM 4 Submission of Matters to a Vote of Security Holders . . 21
ITEM 6 Exhibits and Reports on Form 10-Q . . . . . . . . . . . 21
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2
<PAGE>
AMCORE FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
(in thousands, except share data) 1997 1996
=================================================================================================================================
<S> <C> <C> <C>
Assets Cash and cash equivalents........................................................... $106,061 $94,699
Interest earning deposits in banks.................................................. 867 169
Federal funds sold and other short-term investments................................. 6,567 14,370
Mortgage loans held for sale........................................................ 14,049 11,436
Securities available for sale....................................................... $1,402,189 $1,161,432
Securities held to maturity (fair value of $10,831 in 1997; $45,549 in 1996)........ 10,791 44,880
--------------------------
Total securities............................................................... $1,412,980 $1,206,312
Loans and leases, net of unearned income............................................ 1,655,188 1,601,206
Allowance for loan and lease losses................................................. (17,309) (16,706)
--------------------------
Net loans and leases........................................................... $1,637,879 $1,584,500
Premises and equipment, net......................................................... 47,708 49,188
Intangible assets, net.............................................................. 11,682 12,678
Other real estate owned............................................................. 823 631
Other assets........................................................................ 62,722 56,260
--------------------------
TOTAL ASSETS................................................................... $3,301,338 $3,030,243
==========================
Liabilities LIABILITIES
And Demand deposits..................................................................... $759,996 $755,204
Stockholders' Savings deposits.................................................................... 149,964 159,321
Equity Other time deposits................................................................. 1,213,882 1,167,744
--------------------------
Total deposits................................................................. $2,123,842 $2,082,269
Short-term borrowings............................................................... 747,299 545,624
Long-term borrowings................................................................ 139,145 125,236
Other liabilities................................................................... 41,861 37,975
--------------------------
TOTAL LIABILITIES.............................................................. $3,052,147 $2,791,104
--------------------------
STOCKHOLDERS' EQUITY
Preferred stock, $1 par value: authorized 10,000,000 shares;
issued none....................................................................... $ - $ -
Common stock, $.33 par value: authorized 30,000,000 shares;
June 30, December 31,
1997 1996
Issued............ 16,808,219 16,754,806
Outstanding....... 16,242,383 16,094,088 5,603 5,603
Treasury.......... 565,836 660,718 (3,849) (4,908)
Additional paid-in capital.......................................................... 61,710 59,703
Retained earnings................................................................... 187,033 181,414
Deferred compensation non-employee directors........................................ (1,567) (715)
Net unrealized gain (loss) on securities available for sale, net of taxes........... 261 (1,958)
--------------------------
TOTAL STOCKHOLDERS' EQUITY..................................................... $249,191 $239,139
--------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..................................... $3,301,338 $3,030,243
==========================
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
AMCORE FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
(in thousands, except per share data) 1997 1996 1997 1996
==================================================================================================================================
<S> <C> <C> <C> <C> <C>
Interest Interest and fees on loans and leases................................... $35,476 $32,577 $69,746 $64,394
Income Interest on securities:
Taxable............................................................... 17,028 15,500 33,732 28,136
Tax-exempt............................................................ 3,826 3,734 7,548 6,970
-----------------------------------------
TOTAL INCOME FROM SECURITIES....................................... $20,854 $19,234 $41,280 $35,106
-----------------------------------------
Interest on federal funds sold and other short-term investments......... 164 107 284 342
Interest and fees on mortgage loans held for sale....................... 688 732 1,181 1,490
Interest on deposits in banks........................................... 12 5 14 9
-----------------------------------------
TOTAL INTEREST INCOME.............................................. $57,194 $52,655 $112,505 $101,341
-----------------------------------------
Interest Interest on deposits.................................................... $21,435 $20,091 $42,046 $39,433
Expense Interest on short-term borrowings....................................... 8,629 6,234 17,137 10,756
Interest on long-term borrowings........................................ 2,306 2,693 3,992 4,907
-----------------------------------------
TOTAL INTEREST EXPENSE............................................. $32,370 $29,018 $63,175 $55,096
-----------------------------------------
NET INTEREST INCOME................................................ $24,824 $23,637 $49,330 $46,245
Provision for loan and lease losses..................................... 1,623 998 3,499 1,916
-----------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES...... $23,201 $22,639 $45,831 $44,329
-----------------------------------------
Trust and asset management income....................................... $3,855 $3,651 $7,711 $7,002
Non-Interest Service charges on deposits............................................. 1,844 1,772 3,579 3,503
Income Mortgage revenues....................................................... 1,188 1,045 1,529 1,879
Insurance revenues...................................................... 508 375 956 634
Collection fee income................................................... 547 564 1,172 1,146
Gain on sale of credit card receivables................................. - - 1,931 -
Other................................................................... 1,669 1,719 3,344 3,534
-----------------------------------------
NON-INTEREST INCOME, EXCLUDING NET REALIZED SECURITY GAINS......... $9,611 $9,126 $20,222 $17,698
Net realized security gains............................................. 154 255 1,014 1,019
-----------------------------------------
TOTAL NON-INTEREST INCOME.......................................... $9,765 $9,381 $21,236 $18,717
Compensation expense.................................................... $10,861 $9,924 $21,576 $19,567
Operating Employee benefits....................................................... 2,799 2,888 6,110 6,144
Expenses Net occupancy expense................................................... 1,463 1,448 2,990 3,006
Equipment expense....................................................... 4,588 1,885 6,443 3,795
Professional fees....................................................... 2,287 669 3,243 1,324
Advertising and business development.................................... 758 690 1,382 1,286
Amortization of intangible assets....................................... 512 523 1,024 1,045
Other................................................................... 5,903 4,197 10,200 8,548
-----------------------------------------
TOTAL OPERATING EXPENSES........................................... $29,171 $22,224 $52,968 $44,715
-----------------------------------------
INCOME BEFORE INCOME TAXES.............................................. $3,795 $9,796 $14,099 $18,331
Income taxes............................................................ 668 2,686 3,451 4,970
-----------------------------------------
NET INCOME......................................................... $3,127 $7,110 $10,648 $13,361
=========================================
EARNINGS PER COMMON SHARE.......................................... $0.20 $0.44 $0.66 $0.83
DIVIDENDS PER COMMON SHARE......................................... 0.16 0.16 0.31 0.30
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING......................... 16,220 16,035 16,199 16,017
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
AMCORE FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
(in thousands) 1997 1996
==========================================================================================================================
<S> <C> <C> <C>
Cash Flows NET INCOME....................................................................... $10,648 $13,361
From Adjustments to reconcile net income to net
Operating cash provided by operating activities:
Activities Depreciation and amortization of premises and equipment..................... 3,511 2,507
Amortization and accretion of securities, net............................... 1,019 2,293
Provision for loan and lease losses......................................... 3,499 1,916
Amortization of intangible assets........................................... 1,024 1,045
Gain on sale of securities available for sale............................... (1,069) (1,101)
Loss on sale of securities available for sale............................... 53 82
Purchase of trading securities.............................................. - (536)
Proceeds from sale of trading securities.................................... - 536
Gain on sale of credit card receivables..................................... (1,931) -
Write-down of other real estate owned....................................... 73 -
Deferred compensation expense............................................... 110 (136)
Deferred income taxes....................................................... (2,578) 1,182
Originations of mortgage loans held for sale................................ (77,843) (99,716)
Proceeds from sales of mortgage loans held for sale......................... 75,230 105,763
Other, net.................................................................. (677) 1,556
------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES................................. $11,069 $28,752
------------------------
Cash Flows
From Proceeds from maturities of securities available for sale........................ $82,965 $101,074
Investing Proceeds from maturities of securities held to maturity.......................... 2,913 1,220
Activities Proceeds from sales of securities available for sale............................. 95,125 105,527
Purchase of securities held to maturity.......................................... (9,733) (3,576)
Purchase of securities available for sale........................................ (374,215) (491,367)
Net decrease in federal funds sold and other short-term investments.............. 7,803 7,727
Net increase in interest earning deposits in banks............................... (698) (170)
Proceeds from the sale of consumer finance loans and leases...................... 633 2,044
Proceeds from the sale of credit card receivables................................ 15,457 -
Loans made to customers and principal collection of loans, net................... (71,839) (85,716)
Proceeds from the sale of premises and equipment................................. 96 585
Purchases of premises and equipment.............................................. (2,404) (1,811)
------------------------
NET CASH REQUIRED FOR INVESTING ACTIVITIES................................ ($253,867) ($364,463)
------------------------
Cash Flows
From Net decrease in demand deposits and savings accounts............................. ($4,564) ($30,248)
Financing Net increase in time deposits.................................................... 46,137 82,393
Activities Net increase in short-term borrowings............................................ 178,675 224,468
Proceeds from long-term borrowings............................................... 51,500 74,500
Payment of long-term borrowings.................................................. (14,663) (2,361)
Dividends paid................................................................... (5,029) (4,822)
Issuance of common stock for employee incentive plans............................ 429 190
Issuance of treasury stock for employee incentive plans.......................... 1,675 602
------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES................................. $254,160 $344,722
------------------------
Net change in cash and cash equivalents.......................................... $11,362 $9,011
------------------------
Cash and cash equivalents:
Beginning of year.............................................................. 94,699 107,805
------------------------
End of period.................................................................. $106,061 $116,816
========================
Supplemental
Disclosures of Cash payments for:
Cash Flow Interest paid to depositors.................................................... $42,288 $36,459
Information Interest paid on borrowings.................................................... 20,027 14,473
Income taxes paid.............................................................. 5,719 4,626
Non-Cash
Activities Other real estate acquired in settlement of loans................................ 721 550
Transfer of held to maturity securities to available for sale.................... 31,018 --
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
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 First National Bancorp, Inc. ("FNB"), on
April 18, 1997, which was accounted for using the pooling of interests method.
Operating results for the three and six month periods ended June 30, 1997 are
not necessarily indicative of the results that may be expected for the fiscal
year ending December 31, 1997. 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, 1996.
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 (see Note 5). Share data for all prior year periods
presented have been restated to reflect the merger with FNB.
6
<PAGE>
NOTE 3 - SECURITIES
A summary of securities at June 30, 1997 and December 31, 1996 were as
follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
At June 30, 1997
Securities Available for Sale:
U.S. Treasury $105,783 $443 ($330) $105,896
U.S. Government agencies 262,371 206 (3,020) 259,557
Mortgage-backed securities 304,656 6,144 (2,117) 308,683
State and political subdivisions 682,654 3,524 (4,436) 681,742
Corporate obligations and other 46,298 151 (138) 46,311
----------------------------------------------------------
Total Securities Available for Sale $1,401,762 $10,468 ($10,041) $1,402,189
==========================================================
Securities Held to Maturity:
U.S. Treasury $1,554 $ - ($2) $1,552
State and political subdivisions 4,996 62 (20) 5,038
Corporate obligations and other 4,241 - - 4,241
----------------------------------------------------------
Total Securities Held to Maturity $10,791 $62 ($22) $10,831
----------------------------------------------------------
Total Securities $1,412,554 $10,530 ($10,063) $1,413,020
==========================================================
At December 31, 1996
Securities Available for Sale:
U.S. Treasury $110,524 $579 ($437) $110,666
U.S. Government agencies 144,168 183 (3,689) 140,662
Mortgage-backed securities 547,765 2,494 (5,201) 545,058
State and political subdivisions 263,341 4,545 (1,330) 266,556
Corporate obligations and other 98,922 223 (655) 98,490
----------------------------------------------------------
Total Securities Available for Sale $1,164,720 $8,024 ($11,312) $1,161,432
==========================================================
Securities Held to Maturity:
U.S. Treasury $1,647 $5 ($4) $1,648
U.S. Government agencies 5,684 61 - 5,745
State and political subdivisions 11,413 103 (115) 11,401
Mortgage-backed securities 21,919 642 (50) 22,511
Corporate obligations and other 4,217 27 - 4,244
----------------------------------------------------------
Total Securities Held to Maturity $44,880 $838 ($169) $45,549
----------------------------------------------------------
Total Securities $1,209,600 $8,862 ($11,481) $1,206,981
==========================================================
</TABLE>
Upon completion of the acquisition of First National Bancorp, Inc. ("FNB") of
Monroe, Wisconsin on April 18, 1997, approximately $31,018,000 of FNB's
held to maturity securities were transferred to available-for-sale as
permitted by FAS No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" in order to make the portfolio consistent with AMCORE's
investment objectives.
7
<PAGE>
NOTE 4 - LONG-TERM BORROWINGS
On March 25, 1997, the Company issued $40 million of capital securities
through AMCORE Capital Trust I ("Trust"), a statutory business trust. All
of the common securities are owned by the Company. The capital securities pay
cumulative cash distributions semiannually at an annual rate of 9.35%. The
securities are redeemable from March 25, 2007 until March 25, 2017 at a
declining rate of 104.6750% to 100.0% of the principal amount. After March 25,
2017, they are redeemable at par until June 15, 2027 when redemption is
mandatory. Prior redemption is permitted under certain circumstances, such as
changes in tax or regulatory capital rules. The proceeds of the capital
securities were invested by the Trust in junior subordinated debentures which
represents all of the assets of the trust. The Company fully and
unconditionally guarantees the capital securities through the combined
operation of the debentures and other related documents. The Company's
obligations under the guarantee are unsecured and subordinate to senior and
subordinated indebtedness of the Company.
Several of the Company's subsidiary banks borrow from the Federal Home Loan
Bank (FHLB) in connection with the purchase of mortgage-backed securities for
the investment leveraging program. The current balance of these borrowings is
$174,288,000 with an average maturity of 2.0 years, and a weighted average
borrowing rate of 5.94%.
Scheduled reductions of long-term borrowings are as follows:
============================================================
(in thousands) Total
- ------------------------------------------------------------
1997 . . . . . . . . . . . . . . . . . . . . $ 73,932
1998 . . . . . . . . . . . . . . . . . . . . 39,332
1999 . . . . . . . . . . . . . . . . . . . . 25,609
2000 . . . . . . . . . . . . . . . . . . . . 30,388
2001 . . . . . . . . . . . . . . . . . . . . 438
Thereafter . . . . . . . . . . . . . . . . 46,446
- ------------------------------------------------------------
SUB-TOTAL . . . . . . . . . . . . . . $216,145
Less current portion of FHLB borrowings . . (77,000)
- ------------------------------------------------------------
TOTAL LONG-TERM BORROWINGS . . . . . . $139,145
============================================================
Other long term borrowings include a non interest bearing note from the
January 1993 acquisition of a local collection agency. The note requires
annual payments of $444,000 through 2002. The note was discounted at an
interest rate of 8.0%
NOTE 5 - NEW ACCOUNTING STANDARD
The Financial Accounting Standards Board has recently issued FAS No. 128
"Earning per Share". This statement requires the presentation of basic
earning per share (EPS) and diluted EPS for all income statement periods
presented in the financial statements. Basic EPS is computed by dividing
income available to common shareholders by the weighted average shares
outstanding. Diluted EPS is computed similar to basic EPS except the
denominator is increased to include the number of additional shares that could
be outstanding if potential diluted shares were issued.
Previous accounting standards did not require presentation of diluted EPS if
the dilution was less than three percent. The dilutive effect of AMCORE's
option program has been less than three percent and accordingly not presented
on the financial statements. The presentation as required by FAS 128 would be
as follows:
<TABLE>
<CAPTION>
Quarter Ended June 30, Year-to-Date Ended June 30,
---------------------- -----------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic earnings per share $0.20 $0.44 $0.66 $0.83
Diluted earnings per share $0.19 $0.44 $0.64 $0.82
</TABLE>
8
<PAGE>
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 ("AMCORE") Consolidated
Balance Sheet as of June 30, 1997 as compared to December 31, 1996 and the
results of operations for the three and six months ended June 30, 1997 as
compared to the same periods in 1996. This discussion is intended to be read
in conjunction with the consolidated financial statements and notes thereto
appearing elsewhere in this report. All financial statements and information
have been restated to reflect the April 18, 1997 merger with First National
Bancorp, Inc. ("FNB") of Monroe, Wisconsin.
This 10-Q contains and incorporates by reference certain forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995 with respect to the results of operations and businesses of AMCORE.
These forward- looking statements involve certain risks and uncertainties.
Factors that may cause actual results to differ materially from those
contemplated, projected, forecasted or estimated in such forward-looking
statements include, among others, the following possibilities: (i) heightened
competition, including specifically the intensification of price competition,
the entry of new competitors and the formation of new products by new and
existing competitors; (ii) adverse state and federal legislation and
regulation; (iii) failure to obtain new customers or retain existing
customers; (iv) inability to carry out marketing and/or expansion plans; (v)
loss of key executives; (vi) changes in interest rates; (vii) general economic
and business conditions which are less favorable than expected; (viii)
unanticipated changes in industry trends; and (ix) changes in Federal Reserve
Board Monetary policies.
OVERVIEW OF OPERATIONS
AMCORE's net income for the three months ended June 30, 1997 was $3.1 million,
a decline of 56.0% from the $7.1 million in the 1996 comparable period. The
decline was caused by $4.5 million of after-tax charges related to the
Wisconsin bank mergers and the outsourcing of core bank data processing.
Excluding these charges, second quarter net income would have been $7.6
million, an increase of 7.4%. The earnings for the six months ended June 30,
1997 were $10.6 million, a decline of $2.7 million or 20.3% from the $13.4
million reported in 1996. Excluding the previously mentioned second quarter
charges, net income would have been $15.2 million, a 13.4% increase.
Earnings per share were $0.20 and $0.66 for the three and six month periods
ended June 30, 1997. Excluding the charges, the second quarter earnings per
share would have been $0.48, an increase of $0.04 from the same period in
1996. On the same basis, the earnings per share for the first six months of
1997 would have been $0.94, an increase of $0.11 from the comparable period in
1996.
9
<PAGE>
The primary factors contributing to the second quarter improvement in earnings
from operations were earning asset growth and consistent growth in the
non-interest income. These factors were partially offset by an increased
provision for loan losses related to charge-offs of satellite receivables at
the consumer finance subsidiary.
During the second quarter, AMCORE engaged a national consulting firm to assist
in securing an outsourcing arrangement for its core bank data processing. The
anticipated benefits of outsourcing core bank data processing include year
2000 compliant systems, a standardized platform, current software release and
technology, and an ability to assimilate acquisitions more quickly and less
expensively. As a result of its decision, AMCORE recorded a $2.6 million
after tax charge related to write-offs of obsolete software and equipment,
severance for staff reductions and conversion costs. AMCORE anticipates
modest cost reductions initially with future costs dependent on volume. More
importantly the arrangement addresses the year 2000 and mainframe operating
systems upgrade which had potential significant expenditures related to them.
On April 18, 1997, AMCORE entered the interstate banking arena upon completing
its acquisition of FNB located in Monroe, Wisconsin. AMCORE issued 1,881,524
shares of common stock to the FNB shareholders to effect the merger. FNB has
approximately $228 million of assets and five locations. The transaction was
accounted for as a pooling of interests. Merger related charges of $1.4
million after-tax were recorded at closing related primarily to data
processing integration, legal, accounting and investment banking fees.
On July 16, 1997, AMCORE expanded its presence in Wisconsin with the
completion of the acquisition of Country Bank Shares Corporation ("Country"),
Mt. Horeb, Wisconsin. AMCORE issued 1,646,278 shares of common stock to
Country shareholders. The transaction will be accounted for as a pooling of
interests. Acquisition expenses related to Country of $555,000 after-tax were
recorded on AMCORE's books in the second quarter. Country has recorded
after-tax merger related charges of approximately $1.9 million in the second
quarter, however, the total after-tax charge of $2.5 million will not be fully
reflected in AMCORE's consolidated earnings until they are restated in the
third quarter. The Country merger charges relate to the closing of a
duplicate facility in Belleville, Wisconsin, data processing integration
expenses, legal, accounting and investment banking fees.
AMCORE announced the signing of a letter of intent with Investors Management
Group, LTD ("IMG") of Des Moines, Iowa, on July 8, 1997. IMG is Iowa's
largest independent asset management firm with more than $1.7 billion of
assets under management. IMG's expertise in fixed income securities will
complement AMCORE's award winning Vintage family of mutual funds to bring
total assets under management to over $3.5 billion. The signing of a
definitive agreement and closing are anticipated later in 1997.
AMCORE continues to be "well capitalized" as defined by regulatory guidelines.
At June 30, 1997, the company's total capital to risk weighted assets was
15.16%.
10
<PAGE>
EARNINGS ANALYSIS
The analysis below discusses by major components the changes in net income
when comparing the three and six month periods ended June 30, 1997 and 1996.
NET INTEREST INCOME
Net interest income is the difference between income earned on interest
earning assets and the interest expense incurred on interest bearing
liabilities. The interest income on certain loans and municipal securities is
not subject to federal income tax. For analytical purposes, the interest
income and rates on these types of assets are adjusted to a "fully taxable
equivalent" basis. The fully taxable equivalent adjustment was calculated
using the statutory federal income tax rate of 35%. Adjusted interest income
is as follows (in thousands):
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30 Ended June 30
-------------------------------------------------------------------
1997 1996 1997 1996
===================================================================
<S> <C> <C> <C> <C>
Interest Income Book Basis $57,194 $52,655 $112,505 $101,341
Taxable Equivalent Adjustment 2,134 2,092 4,210 3,913
-------------------------------------------------------------------
Interest Income Taxable Equivalent Basis 59,328 54,747 116,715 105,254
Interest Expense 32,370 29,018 63,175 55,096
-------------------------------------------------------------------
Net Interest Income Taxable Equivalent Basis $26,958 $25,729 $53,540 $50,158
===================================================================
</TABLE>
Net interest income on a fully taxable equivalent basis increased $1.2 million
or 4.8% during the second quarter of 1997 over the same period in 1996. The
improvement in net interest income results mainly from a 7.8% increase in
average earning assets which was partially offset by a narrowing of the
interest rate spread.
The growth in average earning assets can be attributed to strong loan growth
and increased levels of investment securities related to the investment
leveraging program. Average loans increased $150.4 million or 10.2% when
comparing the second quarters of 1997 and 1996. The investment leveraging
program, which is designed to better utilize capital, increased approximately
$127 million on average. This program contributed approximately $2.1 million
to net interest income during the second quarter of 1997, an increase of
$660,000 when compared to the same period in 1996. The program is funded
primarily through the use of repurchase agreements and Federal Home Loan Bank
borrowings. The proceeds of these borrowings are invested principally in
mortgage-backed and U.S. government agency securities.
The net interest spread is the difference between the average rates on
interest-earning assets and the average rates on interest-bearing liabilities.
The interest rate margin represents net interest income divided by average
earning assets. These ratios can also be used to analyze net interest income.
Since a significant portion of the Company's funding is derived from
interest-free sources, primarily demand deposits and total stockholders'
equity,
11
<PAGE>
the effective rate paid for all funding sources is lower than the rate paid on
interest-bearing liabilities alone.
As the table below indicates, the interest rate spread decreased 18 basis
points to 2.99% in the second quarter of 1997 when compared to the 3.17%
during the same period in 1996. The net interest margin was 3.65% during the
second quarter of 1997, a decrease of 11 basis points from the comparable
period in 1996. The interest rate spread on the investment securities
included in the investment leveraging program was 145 and 128 basis points for
the quarters ended June 30, 1997 and 1996, respectively. The interest rate
spread on all other earning assets was 3.40% and 3.57% during the comparable
periods. As a result, the effect of the leveraging program accounted for 6
basis points of the decline in the interest rate margin during these periods.
The net interest margin spread and interest rate margin were 3.00% and 3.66%
for the first six months of 1997, respectively. These represent a decrease of
23 and 17 basis points when compared to the same period in 1996.
12
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
June 30, 1997 June 30, 1996
---------------------------------------- ---------------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
------- -------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Assets
- ------
Interest-Earning Assets:
Taxable Securities $993,294 $17,028 6.86% $963,226 $15,500 6.45%
Tax-exempt securities (1) 291,609 5,886 8.07% 263,920 5,745 8.71%
-----------------------------------------------------------------------------
Total Securities (2) 1,284,903 22,914 7.13% 1,227,146 21,245 6.93%
Mortgage loans held for sale (3) 10,389 199 7.66% 10,475 235 8.97%
Loans (1) (4) 1,623,170 35,550 8.72% 1,472,818 32,658 8.90%
Other earning assets 13,785 176 5.05% 8,431 112 5.31%
Fees on mortgage loans held for sale (3) - 489 - - 497 -
---------- ------- ----- ---------- ------- -----
Total Interest-Earning Assets $2,932,247 $59,328 8.07% $2,718,870 $54,747 8.08%
Noninterest-Earning Assets:
Cash and Due from Banks 78,802 88,273
Other Assets 98,276 109,647
Allowance for Loan Losses (17,126) (14,927)
---------- ----------
Total Assets $3,092,199 $2,901,863
========== ==========
Liabilities and Stockholders' Equity
- ------------------------------------
Interest-Bearing Liabilities:
Interest-bearing demand and savings
deposits $634,844 $4,210 2.66% 635,457 $3,872 2.48%
Time Deposits 1,177,847 17,225 5.87% 1,114,475 16,219 5.92%
---------- ------- ----- ---------- ------- -----
Total interest-bearing deposits 1,812,691 21,435 4.74% 1,749,932 20,091 4.66%
Short-Term Borrowings 598,467 8,629 5.72% 466,326 6,234 5.35%
Long-Term Debt 134,841 2,306 6.86% 176,615 2,693 6.20%
---------- ------- ----- ---------- ------- -----
Total Interest-Bearing Liabilities $2,545,999 $32,370 5.08% 2,392,873 $29,018 4.91%
Noninterest-Bearing Liabilities:
Demand Deposits 271,122 253,246
Other Liabilities (3) 36,292 35,263
---------- ----------
Total Liabilities $2,853,413 $2,681,382
Stockholders' Equity (3) 238,786 220,481
---------- ----------
Total Liabilities and
Stockholders' Equity $3,092,199 $2,901,863
========== ==========
Net Interest Income $26,958 $25,729
======= =======
Net Interest Spread 2.99% 3.17%
===== =====
Interest Rate Margin 3.65% 3.76%
===== =====
</TABLE>
Notes:
(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 average balance has been adjusted to exclude the effect
of Statement of Financial Accounting Standards No. 115.
(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.
(4) The balances of nonaccrual loans are included in average
loans outstanding. Interest on loans includes yield related
loan fees.
13
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended
June 30, 1997 June 30, 1996
---------------------------------------- ---------------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
------- -------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Assets
- ------
Interest-Earning Assets:
Taxable Securities $992,485 $33,732 6.80% $877,265 $28,136 6.42%
Tax-exempt securities (1) 284,985 11,612 8.15% 245,576 10,723 8.73%
-----------------------------------------------------------------------------
Total Securities (2) 1,277,470 45,344 7.10% 1,122,841 38,859 6.92%
Mortgage loans held for sale (3) 9,660 335 6.94% 10,628 419 7.88%
Loans (1) (4) 1,605,648 69,891 8.70% 1,453,187 64,554 8.84%
Other earning assets 11,134 298 5.32% 12,825 352 5.43%
Fees on mortgage loans held for sale (3) - 847 - - 1,070 -
---------- -------- ----- ---------- -------- -----
Total Interest-Earning Assets $2,903,912 $116,715 8.04% $2,599,481 $105,254 8.08%
Noninterest-Earning Assets:
Cash and Due from Banks 80,376 87,933
Other Assets 103,339 114,603
Allowance for Loan Losses (17,155) (14,843)
---------- ----------
Total Assets $3,070,472 $2,787,174
========== ==========
Liabilities and Stockholders' Equity
- ------------------------------------
Interest-Bearing Liabilities:
Interest-bearing demand and savings
deposits $622,830 $7,903 2.56% 632,398 $7,658 2.44%
Time Deposits 1,173,063 34,143 5.87% 1,088,274 31,775 5.87%
---------- -------- ----- ---------- -------- -----
Total interest-bearing deposits 1,795,893 42,046 4.72% 1,720,672 39,433 4.60%
Short-Term Borrowings 604,472 17,136 5.65% 402,844 10,756 5.29%
Long-Term Debt 122,470 3,993 6.57% 153,712 4,907 6.42%
---------- -------- ----- ---------- -------- -----
Total Interest-Bearing Liabilities $2,522,835 $63,175 5.03% 2,277,228 $55,096 4.84%
Noninterest-Bearing Liabilities:
Demand Deposits 271,243 251,729
Other Liabilities (3) 36,406 34,494
---------- ----------
Total Liabilities $2,830,484 $2,563,451
Stockholders' Equity (3) 239,988 223,723
---------- ----------
Total Liabilities and
Stockholders' Equity $3,070,472 $2,787,174
========== ==========
Net Interest Income $53,540 $50,158
======== ========
Net Interest Spread 3.00% 3.23%
===== =====
Interest Rate Margin 3.66% 3.83%
===== =====
</TABLE>
Notes:
(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 average balance has been adjusted to exclude the effect of
Statement of Financial Accounting Standards No. 115.
(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.
(4) The balances of nonaccrual loans are included in average loans
outstanding. Interest on loans includes yield related loan fees.
14
<PAGE>
The level of net interest income is the result of the relationship between
total volume and mix of interest-earning assets and the rates earned, and the
total volume and mix of interest-bearing liabilities and the rates paid. The
rate and volume components associated with interest-earning assets and
interest-bearing liabilities are segregated in the table above to analyze the
changes in net interest income. Because of changes in the mix of the
components of interest-earning assets and interest-bearing liabilities, the
computations for each of the components do not equal the calculation for
interest-earning assets as a total and interest-bearing liabilities as a
total. The table below presents an analysis of the changes in net interest
income.
<TABLE>
<CAPTION>
For Three Months Ended
June 30, 1997 / June 30, 1996
(in thousands)
-----------------------------------------------------------------
Increase (Decrease) Due to Change in Total Net
Average Volume Average Rate Increase (Decrease)
-----------------------------------------------------------------
<S> <C> <C> <C>
Interest Income:
Taxable Securities $507 $1,021 $1,528
Tax-Exempt Securities (1) 577 (436) 141
-----------------------------------------------------------------
Total Securities (2) 1,084 585 1,669
Mortgage Loans Held for Sale (2) (34) (36)
Loans (1) (4) 3,375 (483) 2,892
Other Earning Assets 68 (4) 64
Fees on Mortgage Loans Held for Sale (3) (183) 175 (8)
-----------------------------------------------------------------
Total Interest-Earning Assets $4,353 $228 $4,581
=================================================================
Interest Expense:
Interest-Bearing Demand & Savings Deposits ($4) $342 $338
Time Deposits 928 78 1,006
-----------------------------------------------------------------
Total Interest-Bearing Deposits 748 596 1,344
Short-Term Borrowings 1,837 558 2,395
Long-Term Debt (694) 307 (387)
-----------------------------------------------------------------
Total Interest-Bearing Liabilities $1,891 $1,461 $3,352
=================================================================
Net Interest Margin / Net Interest Income
(FTE) $2,462 ($1,233) $1,229
=================================================================
</TABLE>
The above table shows the changes in interest income (tax equivalent) and
interest expense attributable to volume and rate variances. The change in
interest income (tax equivalent) due to both volume and rate has been
allocated to volume and rate 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 average balance has been adjusted to exclude the effect of
Statement of Financial Accounting Standards No. 115.
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.
4. The balances of non-accrual loans are included in average loans
outstanding. Interest on loans includes yield-related loan fees.
The change in net interest income due to change in average volume when
comparing the second quarter of 1997 and 1996 results as the growth of average
earning assets of 7.85% outpaced the growth of interest bearing liabilities of
6.40%. The growth in average earning assets was due mainly to the 10.21%
growth in average loans.
The decrease in net interest income attributable to rate between the second
quarter of 1997 and 1996 is due to the rate on interest bearing liabilities
increasing 17 basis points while the yield on earning assets declined one
basis point. The increase in the rate paid on interest bearing liabilities is
partially a result of the increase in the rate paid on long-term debt related
to the issuance of $40 million of capital securities at a rate of 9.35% on
March 25, 1997.
15
<PAGE>
<TABLE>
<CAPTION>
For Six Months Ended
June 30, 1997 / June 30, 1996
(in thousands)
-----------------------------------------------------------------
Increase (Decrease) Due to Change in Total Net
Average Volume Average Rate Increase (Decrease)
-----------------------------------------------------------------
<S> <C> <C> <C>
Interest Income:
Taxable Securities $3,922 $1,674 $5,596
Tax-Exempt Securities (1) 1,640 (751) 889
-----------------------------------------------------------------
Total Securities (2) 5,562 923 6,485
Mortgage Loans Held for Sale (36) (48) (84)
Loans (1) (4) 6,811 (1,474) 5,337
Other Earning Assets (45) (9) (54)
Fees on Mortgage Loans Held for Sale (3) (368) 145 (223)
-----------------------------------------------------------------
Total Interest-Earning Assets $12,304 ($843) $11,461
=================================================================
Interest Expense:
Interest-Bearing Demand & Savings Deposits ($117) $362 $245
Time Deposits 2,468 (100) 2,368
-----------------------------------------------------------------
Total Interest-Bearing Deposits 1,767 846 2,613
Short-Term Borrowings 5,593 787 6,380
Long-Term Debt (1,016) 102 (914)
-----------------------------------------------------------------
Total Interest-Bearing Liabilities $6,344 $1,735 $8,079
=================================================================
Net Interest Margin / Net Interest Income
(FTE) $5,960 ($2,578) $3,382
=================================================================
</TABLE>
The above table shows the changes in interest income (tax equivalent) and
interest expense attributable to volume and rate variances. The change in
interest income (tax equivalent) due to both volume and rate has been
allocated to volume and rate 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 average balance has been adjusted to exclude the effect of
Statement of Financial Accounting Standards No. 115.
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.
4. The balances of non-accrual loans are included in average loans
outstanding. Interest on loans includes yield-related loan fees.
The change in net interest income due to change in average volume during the
first six months of 1997 is due to average earning assets increasing 11.71%.
The growth in earning assets is due to a $154.6 million increase in average
investment securities and a $152.5 million increase in average loans. This
growth was funded primarily by a $201.6 million increase in short-term
borrowed funds and $84.8 million in time deposits.
The decrease in net interest income attributable to rate during the first six
months of 1997 due to changes in average rate is a result of yield on earning
assets declining 4 basis points while the rate paid on interest bearing
liabilities increased 19 basis points. The decrease in the yield on earning
assets is due to the rate on average loans declining 14 basis points. The
rate paid on interest bearing liabilities increased as higher rate short-term
borrowed funds grew 50.1% and were the primary source used to fund earning
asset growth.
PROVISION FOR LOAN AND LEASE LOSSES
The provision for loan and lease losses was $1.6 million and $3.5 million for
the three and six month periods ended June 30, 1997, respectively. This
represents an increase of $625,000 or 62.6% and $1.6 million or 82.6% over the
comparable 1996 periods. The year-to-date increase in provisions relates
mainly to $1.5 million of charge-offs of satellite receivables at the consumer
finance subsidiary.
16
<PAGE>
Annualized net charge-offs were .43% for the second quarter of 1997 and .36%
for the six month period compared to .12% and .16% for the comparable 1996
periods. Excluding the charge-offs related to the satellite receivable, the
banking subsidiaries' annualized net charge-offs would have been less than
.20% for both periods.
The reserve for loan losses as a percent of total loans was 1.05% and 1.04% at
June 30, 1997 and December 31, 1996, respectively.
NON-INTEREST INCOME
Total non-interest income in the second quarter was $9.8 million, an increase
of $384,000 from the same period in 1996. On a year-to-date basis, the
increase in non-interest income is $2.5 million or 13.5%. The first quarter
of 1997 included a $1.9 million gain on the sale of most of the company's
credit card receivables and a $742,000 reduction in mortgage revenue resulting
from the write down of mortgage servicing rights as required by FAS No. 125
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments in Liabilities" which was effective January 1, 1997.
Trust and asset management income, the largest component of non-interest
income, increased 5.6% and 10.1% for the three and six month periods ended
June 30, 1997 when compared to the same periods in 1996. Mutual fund assets
in the Vintage Family of Funds increased to $810 million, an increase of 41.0%
from June 30, 1996. The Vintage Equity Fund has recently received its fourth
consecutive five-star rating from Morningstar.
Mortgage revenues increased $143,000 or 13.7% during the second quarter of
1997 as a result of increased origination market share and higher servicing
revenues. The mortgage servicing portfolio as of June 30, 1997 was $925
million. On a year-to-date basis, mortgage revenues, excluding the
previously mentioned write down of mortgage servicing rights, increased
$392,000, or 20.9%.
Insurance revenues increased $133,000 and $322,000 for the three and six month
periods ended June 30, 1997. The increase results from a combination of a
22.9% increase in sales of credit life insurance and a change to recording
insurance revenues gross prior to deducting expenses.
OPERATING EXPENSES
Operating expenses increased $6.9 million or 31.3% during the second quarter
of 1997 when compared to the similar period in 1996. The second quarter
included $2.1 million of pre-tax merger charges and a $4.3 million pre-tax
core bank data processing outsourcing charge, as discussed previously. Without
these charges, operating expenses would have increased $472,000 or 2.1%. The
efficiency ratio excluding the merger and information system outsourcing
charge would have been 61.70% in the second quarter of 1997 compared to 63.20%
in the same quarter last year.
17
<PAGE>
The merger and core bank data processing outsourcing charges were responsible
for most of the second quarter 1997 expense variances when compared to the
second quarter of 1996. The major components of the charges increased
compensation expense $913,000, equipment expense $2.6 million, professional
fees $1.6 million and other expense $1.3 million.
Operating expenses for the year-to-date period totaled $53.0 million, an
increase of $8.3 million or 18.5%. Excluding the previously mentioned
charges, the increase would have been $1.8 million or 4.0%. The largest
portion of the remaining increase is $1.1 million or 5.6% in compensation
expense which is a result of annual merit increases and an accrual for
severance for a former executive.
INCOME TAXES
Income taxes expense for the second quarter of 1997 decreased $2.0 million or
75.1%, primarily as a result of the decreased income before taxes related to
the merger and core bank data processing outsourcing charges. These charges
caused the effective tax rate to be 17.60%; without the charges the effective
tax rate would be 25.66% compared to 27.42% in the second quarter of 1996. The
decrease in effective tax rate results from increased tax exempt income at
both the state and federal levels.
BALANCE SHEET REVIEW
Total assets were $3.3 billion at June 30, 1997, an increase of $271.1 million
or 8.9%. Investment securities and short-term borrowings increased $206.7
million and $201.7 million, respectively, due to an increase in the investment
leveraging program discussed previously.
Total loans increased $54.0 million or 6.7% annualized from December 31, 1996
despite the sale of approximately $17.4 million of credit card and student
loan receivables sold in the first quarter. The adjusted annualized growth
rate would be 9.0%. Total deposits grew at an annualized rate of 4.0% between
December 31, 1996 and June 30, 1997. Approximately 45% of the increase was in
brokered CD's, which were $139.3 million at June 30, 1997.
As previously mentioned, AMCORE issued $40 million of capital trust securities
on March 25, 1997. The proceeds from these securities were used to pay off in
full the term debt of the parent company. The remaining proceeds will be used
to pay off the debt of acquired companies and general corporate purposes.
ASSET QUALITY REVIEW
ALLOWANCE FOR LOAN AND LEASE LOSSES
The allowance for loan and lease losses was $17.3 million at June 30, 1997, an
increase of $603,000 from December 31, 1996. The allowance represented 1.05%
of total loans and 109.8% of non-performing loans at June 30, 1997. The
comparable ratios were 1.04% and 162.2% at December 31, 1996.
18
<PAGE>
Net charge-offs were $1.8 million during the second quarter of 1997 versus
$441,000 for the same quarter of 1996. The increase relates primarily to $1.0
million of charge-offs at the consumer finance subsidiary related to satellite
receivables. AMCORE anticipates the level of charge-offs related to satellite
receivables will decline in future quarters of 1997.
An analysis of the allowance for loan and lease losses as of June 30, 1997 and
1996 is presented below:
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30 Ended June 30
-----------------------------------------------------------------------
1997 1996 1997 1996
=======================================================================
<S> <C> <C> <C> <C>
Balance at beginning of period $17,451 $14,892 $16,706 $14,703
Charge-Offs:
Commercial loans & leases 59 41 170 162
Real estate loans 207 24 274 230
Installment loans 1,627 688 2,724 1,291
Credit card loans 163 165 352 290
-----------------------------------------------------------------------
2,056 918 3,520 1,973
Recoveries:
Commercial loans & leases 69 33 208 98
Real estate loans 6 241 14 249
Installment loans 201 183 366 422
Credit card loans 15 20 36 34
-----------------------------------------------------------------------
291 477 624 803
Net Charge-Offs 1,765 441 2,896 1,170
Provision charged to expense 1,623 998 3,499 1,916
-----------------------------------------------------------------------
Balance at end of period $17,309 $15,449 $17,309 $15,449
=======================================================================
Ratio of net charge-offs during the
period to average loans outstanding
during the period (1) 0.43% 0.12% 0.36% 0.16%
=======================================================================
</TABLE>
(1) On an annualized basis
NON-PERFORMING ASSETS
Non-performing assets increased $5.7 million from December 31, 1996 to $16.6
million at June 30, 1997. A large agricultural credit of $5.4 million was
classified to non-accrual in the first quarter. AMCORE anticipates the
security behind this loan will minimize loss exposure so as not to have a
material adverse effect on future performance. The June 30, 1997 balance of
this loan is $4.4 million. Non-performing assets as of June 30, 1997 and
December 31, 1996 are presented below:
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
--------------------------------------
<S> <C> <C>
Non-accrual loans and leases $15,351 $10,016
Restructured loans and leases 413 283
--------------------------------------
Total non-performing loans and leases $15,764 $10,299
======================================
Other real estate owned 823 631
--------------------------------------
Total non-performing assets $16,587 $10,930
======================================
Loans 90 days or more past due and still accruing $5,924 $3,598
</TABLE>
19
<PAGE>
The increase in loans 90 or more days past due of $2.3 million is related to
staff turnover at a subsidiary bank which caused a delay in the processing of
several larger renewals. Satellite dish receivables 90 or more days past due
were $895,000 at June 30, 1997 compared to $859,000 at December 31, 1996.
Satellite dish receivables 90 or more days past due peaked at $1.6 million in
March of 1997.
CAPITAL MANAGEMENT
Total stockholder's equity was $249.2 million at June 30, 1997, an increase of
$10.1 million from December 31, 1996, including a $2.2 million increase in the
unrealized gain on securities available for sale. The book value per share of
AMCORE common stock was $15.34 at June 30, 1997. AMCORE declared a $.16 per
share dividend during the first two quarters of 1997.
AMCORE is considered "well capitalized" based on regulatory guidelines. The
previously mentioned $40 million of trust capital securities issued during the
first quarter are considered Tier I capital for regulatory purposes and caused
an increase in all regulatory capital ratios. AMCORE's leverage ratio was
9.00% at June 30, 1997. AMCORE's ratio of Tier I capital at 14.27% and total
risk based capital of 15.16% significantly exceed the regulatory minimum as
indicated in the table below:
<TABLE>
<CAPTION>
June 30, 1997 June 30, 1996
------------- -------------
Amount Ratio Amount Ratio
==========================================================================
<S> <C> <C> <C> <C>
Tier 1 Capital $277,217 14.27% $215,571 12.44%
Tier 1 Capital Minimum 77,706 4.00% 69,315 4.00%
--------------------------------------------------------------------------
Amount in Excess of Minimum $199,511 10.27% $146,256 8.44%
==========================================================================
Total Capital $294,526 15.16% $231,020 13.33%
Total Capital Minimum 155,423 8.00% 138,647 8.00%
--------------------------------------------------------------------------
Amount in Excess of Minimum $139,103 7.16% $92,373 5.33%
==========================================================================
Risk Adjusted Assets $1,942,737 $1,733,299
================ ================
</TABLE>
20
<PAGE>
PART II
ITEM 4. Submission of Matters to a Vote of Security Holders
(a) - (c) Incorporated herein by reference to the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1997
(File No. 0-13393).
ITEM 6. Exhibits and Reports on Form 10-Q Page
----
(a) 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 of 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* Amended and Restated Transitional Compensation Agreement
dated June 1, 1996 between AMCORE Financial, Inc. and
Robert J. Meuleman. (Incorporated by reference to
Exhibit 10.3A of AMCORE's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1996.)
10.3B* Amended and Restated Transitional Compensation Agreement
dated June 1, 1996 between AMCORE Financial, Inc. and the
following individuals: John R. Hecht, and James S.
Waddell. (Incorporated by reference to Exhibit 10.3B of
AMCORE's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1996.)
10.3C* Transitional Compensation Agreement dated June 1, 1996
between AMCORE Financial, Inc. and the following
individuals: Charles E. Gagnier and Gerald W. Lister.
(Incorporated by reference to Exhibit 10.3C of AMCORE's
Quarterly Report on Form 10-Q for the quarter ended June
30, 1996.)
10.3D* Transitional Compensation Agreement dated June 1, 1996
between AMCORE Financial, Inc. and the following
individuals: William J. Hippensteel, Alan W. Kennebeck
and James F. Warsaw. (Incorporated by reference to
Exhibit 10.3D of AMCORE's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1996.)
10.3E* Transitional Compensation Agreement dated May 21, 1997 24
between AMCORE Financial, Inc. and Kenneth E. Edge.
21
<PAGE>
10.3F* Transitional Compensation Agreement dated May 21, 1997 45
between AMCORE Financial, Inc. and Charie A. Zanck.
10.4 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).
10.5* Executive Insurance Agreement dated March 1, 1996 between
AFI and the following executives: Robert J. Meuleman,
and James S. Waddell (Incorporated by reference to
Exhibit 10.6 of the Company's Form 10-Q for the quarter
ended March 31, 1996).
10.6 Indenture, dated as of March 25, 1997, between the
Company and The First National Bank of Chicago
(incorporated herein by reference to Exhibit 4.1 of the
Company's registration statement on Form S-4,
Registration No. 333-25375).
10.7 Form of New Guarantee between the Company and The First
National Bank of Chicago (incorporated herein by
reference to Exhibit 4.7 of the Company's registration
statement on Form S-4, Registration No. 333-25375).
22 1997 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, 1996).
27 Financial Data Schedule
99 Additional exhibits - Press release dated July 24, 1997. 66
(b) One report on Form 8-K was filed with the Commission on
July 14, 1997 announcing a Letter of Intent for the
acquisition of Investors Management Group on July 8, 1997
(Incorporated by reference to AMCORE's Form 8-K as filed
with the Commission on July 14, 1997).
One report on Form 8-K was filed with the Commission on
July 31, 1997 announcing the consummation of the merger
with Country Bank Shares Corporation on July 16, 1997
(Incorporated by reference to AMCORE's Form 8-K as filed
with the Commission on July 31, 1997).
22
<PAGE>
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: August 14, 1997
/s/ John R. Hecht
--------------------------------
John R. Hecht
Senior Vice President and Chief
Financial Officer
(Duly authorized officer of
the registrant and principal
financial officer)
23
AMENDED AND RESTATED
--------------------
TRANSITIONAL COMPENSATION AGREEMENT
-----------------------------------
AGREEMENT by and between Amcore Financial, Inc., a Nevada corporation
(the "Company"), and KENNETH E. EDGE (the "Executive"), dated as of the 21st
day of May, 1997. This Agreement amends, restates and supersedes any and all
prior agreements between the Company and the Executive relating to the subject
matter of this Agreement, including (but not by way of limitation) the
Transitional Compensation Agreement dated September 25, 1995.
The Board of Directors of the Company (the "Board") has determined that
it is in the best interests of the Company and its shareholders to assure that
the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control
(as defined below) of the Company. The Board believes it is imperative to
diminish the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control,
to encourage the Executive's full attention and dedication to the Company
currently and in the event of any threatened or pending Change of Control, and
to provide the Executive with compensation and benefit arrangements upon a
Change of Control which ensure that the compensation and benefits expectations
of the Executive will be satisfied and which are competitive with those of
other similar corporations. Therefore, in order to accomplish these
objectives, the Board has caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions
<PAGE>
(a) The "Effective Date" shall mean the first date during the
Change of Control Period (as defined in paragraph (b), below) on which a
Change of Control (as defined in Section 2) occurs. Anything in this
Agreement to the contrary notwithstanding, if a Change of Control occurs and
if the Executive's employment with the Company is terminated or the Executive
ceases to be an officer of the Company prior to the date on which the Change
of Control occurs, and if it is reasonably demonstrated by the Executive that
such termination of employment or cessation of status as an officer (i) was at
the request of a third party who has taken steps reasonably calculated to
effect the Change of Control, or (ii) otherwise arose in connection with or
anticipation of the Change of Control and was not (A) for conduct by the
Executive of the type described in Section 4(b), below, (B) for significant
deficiencies in the Executive's performance of his duties to the Company
(including, but not by way of limitation, significant failure to cooperate in
implementing a decision of the Board), or (C) for some other specific
substantial business reason unrelated to the Change of Control, then for all
purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment or cessation
of status as an officer.
(b) The "Change of Control Period" shall mean the period which
commenced on September 25, 1995 and ending on the third anniversary of such
date; provided, however, that on September 25, 1996, and on each annual
anniversary of such date (such date and each annual anniversary thereof being
hereinafter referred to as a "Renewal Date"), this Agreement and the Change of
Control Period shall be automatically extended so as to terminate three (3)
years from such Renewal Date, unless at least sixty (60) days prior to the
Renewal Date the Company shall
2
<PAGE>
give notice to the Executive that the Change of Control Period shall not be so
extended, in which case this Agreement shall terminate upon the expiration of
the Change of Control Period.
2. Change of Control. For the purpose of this Agreement, a "Change
of Control" shall mean:
(a) The acquisition, other than from the Company, by any
individual, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) of beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of fifteen percent (15%) or more of either the then
outstanding shares of common stock of the Company or the combined voting power
of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors, but excluding for this purpose any
such acquisition by the Company or any of its subsidiaries, or any employee
benefit plan (or related trust) of the Company or its subsidiaries, or any
corporation with respect to which, following such acquisition, more than sixty
percent (60%) of, respectively, the then outstanding shares of common stock of
such corporation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the common stock and voting securities of the Company
immediately prior to such acquisition in substantially the same proportion as
their ownership, immediately prior to such acquisition, of the then
outstanding shares of common stock of the Company or the combined voting power
of the then outstanding voting
3
<PAGE>
securities of the Company entitled to vote generally in the election of
directors, as the case may be; or
(b) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided that any individual becoming a director subsequent to
the date hereof, whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of the directors of the Company (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act); or
(c) Approval by the stockholders of the Company of (i) a
reorganization, merger or consolidation of the Company, in each case, with
respect to which all or substantially all of the individuals and entities who
were the respective beneficial owners of the common stock and voting
securities of the Company immediately prior to such reorganization, merger or
consolidation do not, following such reorganization, merger or consolidation,
beneficially own, directly or indirectly, more than sixty percent (60%) of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such reorganization, merger or consolidation, or (ii) a
complete liquidation or dissolution of the
4
<PAGE>
Company, or (iii) the sale or other disposition of all or substantially all of
the assets of the Company.
3. Effective Period. This Agreement shall be in effect for the period
commencing on the Effective Date and ending on the third anniversary of such
date (the "Effective Period").
4. Termination of Employment
(a) Death or Disability. The Executive's employment shall
terminate automatically upon the Executive's death during the Effective
Period. If the Company determines in good faith that the Disability of the
Exec utive has occurred during the Effective Period (pursuant to the
definition of Disability as set forth below), it may give to the Executive
written notice in accordance with Section 11(b) of this Agreement of its
intention to terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective on the
thirtieth (30th) day after receipt of such notice by the Executive (the
"Disability Effective Date"), provided that, within the thirty (30) days after
such receipt, the Executive shall not have returned to full-time performance
of the Executive's duties. For purposes of this Agreement, "Disability" shall
mean the absence of the Executive from the Executive's duties with the Company
on a full-time basis for one hundred and eighty (180) consecutive business
days as a result of incapacity due to mental or physical illness which is
determined to be total and permanent by a physician selected by the Company or
its insurers and acceptable to the Executive or the Executive's legal
representative (such agreement as to acceptability not to be withheld
unreasonably.)
5
<PAGE>
(b) Cause. The Company may terminate the Executive's employment
during the Effective Period for Cause and may suspend the Executive from his
duties with full pay and benefits if the Executive is indicted for a felony
involving moral turpitude; provided, however, that the Executive will repay
all amounts paid by the Company from the date of such suspension if the
Executive is convicted of such felony. For purposes of this Agreement,
"Cause" shall mean (i) repeated violations by the Executive of the Executive's
assigned duties as an employee of the Company (other than as a result of
incapacity due to physical or mental illness) which are demonstrably willful
and deliberate on the Executive's part, which are committed in bad faith or
without reasonable belief that such violations are in the best interests of
the Company, and which are not remedied within thirty (30) days after receipt
of written notice from the Company specifying such violations or (ii) the
conviction of the Executive of a felony involving moral turpitude.
(c) Good Reason
(i) The Executive's employment may be terminated during the
Effective Period by the Executive for Good Reason (as defined below).
(ii) For purposes of this Agreement, "Good Reason" shall
mean:
(A) The assignment to the Executive of any duties
inconsistent in any material respect with the Executive's position (including
status, offices, titles and reporting requirements), authority, duties or
responsibilities as in effect immediately prior to the Effective Date, or any
other action by the Company which results in a diminution in such position,
authority, duties or responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action
6
<PAGE>
not taken in bad faith and which is remedied by the Company within thirty (30)
days after receipt of notice thereof given by the Executive;
(B) Any reduction by the Company in Executive's
compensation or benefits as in effect immediately prior to the Effective Date,
other than an isolated, insubstantial and inadvertent reduction not occurring
in bad faith and which is remedied by the Company promptly after receipt of
notice thereof given by the Executive;
(C) The Company's requiring the Executive to be based
at any office or location more than twenty (20) miles from that in effect
immediately prior to the Effective Date;
(D) Any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by this
Agreement; or
(E) Any failure by the Company to comply with and
satisfy Section 10(c) of this Agreement, provided that such successor has
received at least ten (10) days prior written notice from the Company or the
Executive of the requirements of Section 10(c) of this Agreement. For purposes
of this Section 4(c), any good faith determination of "Good Reason" made by
the Executive shall be conclusive.
(d) Notice of Termination. Any termination by the Company for
Cause, or by the Executive for Good Reason, shall be communicated by a Notice
of Termination to the other party given in accordance with Section 11(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination"
means a written notice which (i) indicates the specific termination
7
<PAGE>
provision in this Agreement relied upon, (ii) to the extent applicable, sets
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the provision so
indicated and (iii) if the Date of Termination (as defined below) is other
than the date of receipt of such notice, specifies the termination date (which
date shall be not more than fifteen (15) days after the giving of such
notice). The failure by the Executive or the Company to set forth in the
Notice of Termination any fact or circumstance which contributes to a showing
of Good Reason or Cause shall not waive any right of the Executive or the
Company hereunder or preclude the Executive or the Company from asserting such
fact or circumstance in enforcing the Executive's or the Company's rights
hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability,
the Date of Termination shall be the date on which the Company notifies the
Executive of such termination, and (iii) if the Executive's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Effective Date, as the
case may be.
5. Obligations of the Company upon Termination
(a) Good Reason; Other Than for Cause, Death or Disability. If,
during the Effective Period, the Company shall terminate the Executive's
employment other than for Cause or Disability, or the Executive shall
terminate employment for Good Reason:
8
<PAGE>
(i) The Company shall pay to the Executive in a lump sum in
cash within thirty (30) days after the Date of Termination the aggregate of
the following amounts:
A. The sum of (1) the Executive's then current annual
base salary through the Date of Termination to the extent not theretofore
paid; (2) the product of (x) Executive's Recent Average Bonus (as defined
below) and (y) a fraction, the numerator of which is the number of days in the
then current fiscal year through the Date of Termination, and the denominator
of which is three hundred and sixty-five (365); (3) any compensation
previously deferred by the Executive (together with any accrued interest or
earnings thereon); and (4) any accrued vacation pay; in each case to the
extent not theretofore paid (the sum of the amounts described in parts (1),
(2), (3) and (4), above, being hereinafter referred to as the "Accrued
Obligations"). For purposes of this Agreement, Executive's Recent Average
Bonus shall be the average annualized (for any fiscal year consisting of less
than twelve (12) full months or with respect to which the Executive has been
employed by the Company for less than twelve (12) full months) bonus paid or
payable, before taking into account any deferral, to the Executive by the
Company and its affiliated companies in respect of the three (3) fiscal years
immediately preceding the fiscal year in which the termination of Executive's
employment occurs; and
B. The amount (such amount being hereinafter referred
to as the "Severance Amount") equal to the product of multiplying by three (3)
the sum of (1) the Executive's then current annual base salary and (2)
Executive's Recent Average Bonus; provided, however, that such amount shall be
reduced by the present value (determined as provided in Section 280G(d)(4) of
the Internal Revenue Code of 1986, as amended (the "Code")) of any other
amount
9
<PAGE>
of severance relating to salary or bonus continuation to be received by
the Executive, upon such termination of employment, under any other severance
plan, policy or arrangement of the Company; and
C. A separate lump-sum supplemental retirement benefit
(the amount of such benefit being hereinafter referred to as the "Supplemental
Retirement Amount") equal to the difference between (1) the actuarial
equivalent (utilizing for this purpose the actuarial assumptions utilized with
respect to the Financial Security Plans of the Company (or any successor plans
thereto) (the "Retirement Plans") during the ninety (90)-day period
immediately preceding the Effective Date) of the benefits payable under the
Retirement Plans and under any supplemental and/or excess retirement plans of
the Company and its affiliated companies providing benefits for the Executive
(the "SERPs") which the Executive would have received if the Executive's
employment had continued (at the compensation level in effect at the time of
termination of Executive's employment) for three (3) years after the Date of
Termination, assuming for this purpose that all accrued benefits are fully
vested and that benefit accrual formulas are no less advantageous to the
Executive than those in effect during the ninety (90)-day period immediately
preceding the Effective Date, and (2) the actuarial equivalent (utilizing for
this purpose the actuarial assumptions utilized with respect to the Retirement
Plans during the ninety (90)-day period immediately preceding the Effective
Date) of the Executive's actual benefits (paid or payable), if any, under the
Retirement Plans and the SERPs; and
(ii) For three (3) years after the Date of Termination, or
such longer period as any other plan, program, practice or policy may provide,
the Executive's employment
10
<PAGE>
shall continue under all applicable stock option plans, restricted stock
plans, and other equity incentive plans or programs of the Company and its
affiliates solely for purposes of determining (A) the date(s) on which any
option(s) or similar right(s) shall become exercisable or shall expire and (B)
the date(s) on which any stock restriction(s) shall lapse; provided that if
such continuation is not possible under the provisions of such plans or
programs or under applicable law, the Company shall arrange to provide
benefits to the Executive substantially equivalent in value to those required
to be provided under this subparagraph (ii).
(iii) For three (3) years after the Date of Termination, or
such longer period as any other plan, program, practice or policy may provide,
the Company shall continue benefits to the Executive and/or the Executive's
family at least equal to those which would have been provided to them, if the
Executive's employment had not been terminated, in accordance with (A) the
welfare benefit plans, practices, programs or policies of the Company and its
affiliated companies as in effect and applicable generally to other peer
executives and their families during the ninety (90)-day period immediately
preceding the Effective Date or (B) if more favorable to the Executive, those
in effect generally from time to time thereafter with respect to other peer
executives of the Company and its affiliated companies and their families
(such continuation of such benefits for the applicable period herein set forth
being hereinafter referred to as "Welfare Benefit Continuation"); provided
that if such continued coverage is not permitted by the applicable plans or by
applicable law, the Company shall provide the Executive and/or Executive's
family with comparable benefits of equal value; and provided further that if
the Executive becomes reemployed with another employer and is eligible to
receive medical or other welfare benefits under
11
<PAGE>
another employer-provided plan, the medical and other welfare benefits
described herein shall be secondary to those provided under such other plan
during such applicable period of eligibility. For purposes of determining
eligibility of the Executive for retiree benefits pursuant to such plans,
practices, programs and policies, the Executive shall be considered to have
remained employed until the end of the Effective Period and to have retired on
the last day of such period; and
(iv) To the extent not theretofore paid or provided, the
Company shall timely pay or provide to the Executive and/or the Executive's
family any other amounts or benefits required to be paid or provided or which
the Executive and/or the Executive's family is eligible to receive pursuant to
this Agreement or under (A) any other plan, program, policy or practice, or
contract or agreement of the Company and its affiliated companies as in effect
and applicable generally to other peer executives and their families during
the ninety (90)-day period immediately preceding the Effective Date or (B) if
more favorable to the Executive, those in effect generally from time to time
thereafter with respect to other peer executives of the Company and its
affiliated companies and their families (such other amounts and benefits being
hereinafter referred to as the "Other Benefits").
(b) Death. If the Executive's employment is terminated by reason
of the Executive's death during the Effective Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this Agreement, other than for (i) payment of the Accrued Obligations
(which shall be paid to the Executive's estate or beneficiary, as applicable,
in a lump sum in cash within thirty (30) days of the Date of Termination) and
(ii) the timely payment or provision of the Welfare Benefit Continuation and
Other Benefits.
12
<PAGE>
(c) Disability. If the Executive's employment is terminated by
reason of the Executive's Disability during the Effective Period, this
Agreement shall terminate without further obligations to the Executive, other
than for (i) payment of the Accrued Obligations (which shall be paid to the
Executive in a lump sum in cash within thirty (30) days of the Date of
Termination) and (ii) the timely payment or provision of the Welfare Benefit
Continuation and Other Benefits.
(d) Cause; Other than for Good Reason. If the Executive's
employment shall be terminated for Cause during the Effective Period, this
Agreement shall terminate without further obligations to the Executive other
than the obligation to pay the Executive's then current annual base salary
through the Date of Termination, plus the amount of any compensation
previously deferred by the Executive, in each case to the extent theretofore
unpaid. If the Executive terminates employment during the Effective Period,
excluding a termination for Good Reason, this Agreement shall terminate
without further obligations to the Executive, other than for (i) the Accrued
Obligations and (ii) the timely payment or provision of Other Benefits. In
such case, all Accrued Obligations shall be paid to the Executive in a lump
sum in cash within thirty (30) days of the Date of Termination.
6. Limitation of Payments.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or distribution by the
Company to or for the benefit of the Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise) would be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code"), then the amount
payable to the
13
<PAGE>
Executive pursuant to paragraph (a)(i) of Section 5 of this Agreement shall be
reduced so that it is the maximum amount which can be paid without any payment
or distribution by the Company to or for the benefit of the Executive (whether
paid or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise) being subject to the excise tax imposed by Section
4999 of the Code.
(b) All determinations required to be made under this Section 6
shall be made by McGladrey & Company (the "Accounting Firm"), which shall
provide detailed supporting calculations both to the Company and the Executive
within fifteen (15) business days of receipt of a written request from the
Company or the Executive for a determination as to whether reduction of a
payment is necessary in order to avoid the excise tax imposed by Section 4999
of the Code. In the event that the Accounting Firm is serving as accountant
or auditor for the individual, entity or group effecting the Change of
Control, the Executive shall appoint another nationally recognized accounting
firm to make the determinations required hereunder (which accounting firm
shall then be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by the Company. If the
Accounting Firm determines that a payment under this Agreement (without
reduction pursuant to paragraph (a), above) will not be subject to the excise
tax imposed by Section 4999 of the Code, the Accounting Firm shall furnish the
Executive with a written opinion that failure to report, on the Executive's
applicable federal income tax return, any excise tax in connection with such
payment would not result in the imposition of a negligence or similar penalty.
Any good faith determination by the Accounting Firm shall be binding upon the
Company and the Executive.
14
<PAGE>
7. Non-exclusivity of Rights. Except as explicitly provided in this
Agreement, nothing in this Agreement shall prevent or limit the Executive's
continuing or future participation in any plan, program, policy or practice
provided by the Company or any of its affiliated companies and for which the
Executive may qualify, nor shall anything herein limit or otherwise affect
such rights as the Executive may have under applicable law or under any other
contract or agreement with the Company or any of its affiliated companies.
Amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any other plan, policy, practice or program of, or any other
contract or agreement with, the Company or any of its affiliated companies at,
or subsequent to, the Date of Termination shall be payable in accordance with
such plan, policy, practice or program or contract or agreement except as
explicitly modified by this Agreement.
15
<PAGE>
8. Full Settlement; Resolution of Disputes
(a) The Company's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim,
right or action which the Company may have against the Executive or others. In
no event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Executive
under any of the provisions of this Agreement and, except as provided in
Section 5(a)(iii) of this Agreement, such amounts shall not be reduced whether
or not the Executive obtains other employment. The Company agrees to pay
promptly upon receipt of proper invoices, to the fullest extent permitted by
law, all legal fees and expenses which the Executive may reasonably incur as a
result of any contest by the Company, the Executive or others of the validity
or enforceability of, or liability under, any provision of this Agreement or
any guarantee of performance thereof (including as a result of any contest
initiated by the Executive about the amount of any payment due pursuant to
this Agreement), plus in each case interest on any delayed payment at the
applicable federal rate provided for in Section 7872(f)(2)(A) of the Code;
provided, however, that in the event that it is finally judicially determined
that the Executive was terminated for Cause, then the Executive shall be
obligated to repay to the Company the full amount of all such legal fees and
expenses paid for the Executive by the Company in connection with that
contest, plus interest at the rate described above.
(b) If there shall be any dispute between the Company and the
Executive (i) in the event of any termination of the Executive's employment by
the Company, whether such
16
<PAGE>
termination was for Cause, or (ii) in the event of any termination of
employment by the Executive, whether Good Reason existed, then, unless and
until there is a final, nonappealable judgment by a court of competent
jurisdiction declaring that such termination was for Cause or that the
determination by the Executive of the existence of Good Reason was not made in
good faith, the Company shall pay all amounts, and provide all benefits, to
the Executive and/or the Executive's family or other beneficiaries, as the
case may be, that the Company would be required to pay or provide pursuant to
Section 5(a) hereof as though such termination were by the Company without
Cause or by the Executive with Good Reason; provided, however, that the
Company shall not be required to pay any disputed amounts pursuant to this
paragraph except upon receipt of an undertaking by or on behalf of the
Executive and/or the other recipient(s), as the case may be, to repay all such
amounts to which the Executive or other recipient, as the case may be, is
ultimately adjudged by such court not to be entitled.
9. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its
affiliated companies, and their respective businesses, which shall have been
obtained by the Executive during the Executive's employment by the Company or
any of its affiliated companies and which shall not be or become public
knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement). After termination of the
Executive's employment with the Company, the Executive shall not, without the
prior written consent of the Company or as may otherwise be required by law or
legal process, communicate or divulge any such information, knowledge or data
to anyone other than the Company and those
17
<PAGE>
designated by it. However, in no event shall an asserted violation of the
provisions of this Section 9 constitute a basis for deferring or withholding
any amounts otherwise payable to the Executive under this Agreement.
10. Successors
(a) This Agreement is personal to the Executive and, without the
prior written consent of the Company, no obligations or rights hereunder shall
be assignable by the Executive otherwise than by will or the laws of descent
or distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean
the Company as hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this Agreement, by
operation of law or otherwise.
11. Miscellaneous
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Illinois, without reference to principles of
choice of law. The captions of this Agreement are for convenience only and
are not part of the provisions hereof and shall have no
18
<PAGE>
force or effect. This Agreement may not be amended or modified otherwise than
by a written agreement executed by the parties hereto or their respective
successors and legal representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given to the other party by hand delivery or commercial
messenger delivery or by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Executive:
--------------------
Kenneth E. Edge
1684 Oakforest Drive
Rockford, IL 61107
If to the Company:
------------------
Amcore Financial, Inc.
501 Seventh Street
P.O. Box 1537
Rockford, Illinois 61110-0037
Attention: Mr. Robert J. Meuleman
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such federal, state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
19
<PAGE>
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision hereof or the failure to assert any right that
the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Section 4(c) of this Agreement, shall not be deemed to be a waiver
of such provision or right or of any other provision of or right under this
Agreement.
(f) The Executive and the Company acknowledge that this Agreement
is not a contract of employment and that, except as may otherwise be provided
under any other written agreement between the Executive and the Company, the
employment of the Executive by the Company is, and shall remain during the
Effective Period, "at will" and may, subject to Section 5, above, be
terminated by either the Executive or the Company at any time. Moreover,
subject to Section 1, above, if prior to the Effective Date (i) the
Executive's employment with the Company and all affiliates terminates or (ii)
the Executive ceases to be an officer of the Company and of all affiliates,
then the Executive shall have no further rights under this Agreement.
(g) This Agreement embodies the entire agreement and understanding
between the Company and the Executive and supersedes all prior agreements and
understandings between the Company and Executive relating to the subject
matter hereof, including (but not by way of limitation) the Transitional
Compensation Agreement dated September 25, 1995.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization of its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
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AMCORE FINANCIAL, INC.
By: /s/ James S. Waddell
--------------------------------------------
James S. Waddell
Its Executive Vice President and Chief Administrative Officer
---------------------------------------------------------
/s/ Kenneth E. Edge
-------------------------------------
Kenneth E. Edge
("Executive")
21
TRANSITIONAL COMPENSATION AGREEMENT
-----------------------------------
AGREEMENT by and between Amcore Financial, Inc., a Nevada corporation
(the "Company"), and CHARIE A. ZANCK (the "Executive"), dated as of the 21st
day of May, 1997. This Agreement restates and supersedes any and all prior
agreements between the Company and the Executive relating to the subject
matter of this Agreement.
The Board of Directors of the Company (the "Board") has determined that
it is in the best interests of the Company and its shareholders to assure that
the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control
(as defined below) of the Company. The Board believes it is imperative to
diminish the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control,
to encourage the Executive's full attention and dedication to the Company
currently and in the event of any threatened or pending Change of Control, and
to provide the Executive with compensation and benefit arrangements upon a
Change of Control which ensure that the compensation and benefits expectations
of the Executive will be satisfied and which are competitive with those of
other similar corporations. Therefore, in order to accomplish these
objectives, the Board has caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
<PAGE>
1. Certain Definitions
(a) The "Effective Date" shall mean the first date during the
Change of Control Period (as defined in paragraph (b), below) on which a
Change of Control (as defined in Section 2) occurs. Anything in this
Agreement to the contrary notwithstanding, if a Change of Control occurs and
if the Executive's employment with the Company is terminated or the Executive
ceases to be an officer of the Company prior to the date on which the Change
of Control occurs, and if it is reasonably demonstrated by the Executive that
such termination of employment or cessation of status as an officer (i) was at
the request of a third party who has taken steps reasonably calculated to
effect the Change of Control, or (ii) otherwise arose in connection with or
anticipation of the Change of Control and was not (A) for conduct by the
Executive of the type described in Section 4(b), below, (B) for significant
deficiencies in the Executive's performance of his duties to the Company
(including, but not by way of limitation, significant failure to cooperate in
implementing a decision of the Board), or (C) for some other specific
substantial business reason unrelated to the Change of Control, then for all
purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment or cessation
of status as an officer.
(b) The "Change of Control Period" shall mean the period commencing
on the date of execution hereof and ending on September 25, 1998; provided,
however, that on September 25, 1996, and on each annual anniversary of such
date (such date and each annual anniversary thereof being hereinafter referred
to as a "Renewal Date"), this Agreement and the Change of Control Period shall
be automatically extended so as to terminate three (3) years from such Renewal
Date, unless at least sixty (60) days prior to the Renewal Date the Company
shall
2
<PAGE>
give notice to the Executive that the Change of Control Period shall not be so
extended, in which case this Agreement shall terminate upon the expiration of
the Change of Control Period.
2. Change of Control. For the purpose of this Agreement, a "Change
of Control" shall mean:
(a) The acquisition, other than from the Company, by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of fifteen percent (15%) or more of either the then outstanding
shares of common stock of the Company or the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in the
election of directors, but excluding for this purpose any such acquisition by
the Company or any of its subsidiaries, or any employee benefit plan (or
related trust) of the Company or its subsidiaries, or any corporation with
respect to which, following such acquisition, more than sixty percent (60%)
of, respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the common stock and voting securities of the Company
immediately prior to such acquisition in substantially the same proportion as
their ownership, immediately prior to such acquisition, of the then
outstanding shares of common stock of the Company or the combined voting power
of the then outstanding voting
3
<PAGE>
securities of the Company entitled to vote generally in the election of
directors, as the case may be; or
(b) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided that any individual becoming a director subsequent to
the date hereof, whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of the directors of the Company (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act); or
(c) Approval by the stockholders of the Company of (i) a
reorganization, merger or consolidation of the Company, in each case, with
respect to which all or substantially all of the individuals and entities who
were the respective beneficial owners of the common stock and voting
securities of the Company immediately prior to such reorganization, merger or
consolidation do not, following such reorganization, merger or consolidation,
beneficially own, directly or indirectly, more than sixty percent (60%) of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such reorganization, merger or consolidation, or (ii) a
complete liquidation or dissolution of the
4
<PAGE>
Company, or (iii) the sale or other disposition of all or substantially all of
the assets of the Company.
3. Effective Period. This Agreement shall be in effect for the period
commencing on the Effective Date and ending on the first anniversary of such
date (the "Effective Period").
4. Termination of Employment
(a) Death or Disability. The Executive's employment shall
terminate automatically upon the Executive's death during the Effective
Period. If the Company determines in good faith that the Disability of the
Executive has occurred during the Effective Period (pursuant to the definition
of Disability as set forth below), it may give to the Executive written notice
in accordance with Section 11(b) of this Agreement of its intention to
terminate the Executive's employment. In such event, the Executive's
employment with the Company shall terminate effective on the thirtieth (30th)
day after receipt of such notice by the Executive (the "Disability Effective
Date"), provided that, within the thirty (30) days after such receipt, the
Executive shall not have returned to full-time performance of the Executive's
duties. For purposes of this Agreement, "Disability" shall mean the absence
of the Executive from the Executive's duties with the Company on a full-time
basis for one hundred and eighty (180) consecutive business days as a result
of incapacity due to mental or physical illness which is determined to be
total and permanent by a physician selected by the Company or its insurers and
acceptable to the Executive or the Executive's legal representative (such
agreement as to acceptability not to be withheld unreasonably.)
5
<PAGE>
(b) Cause. The Company may terminate the Executive's employment
during the Effective Period for Cause and may suspend the Executive from his
duties with full pay and benefits if the Executive is indicted for a felony
involving moral turpitude; provided, however, that the Executive will repay
all amounts paid by the Company from the date of such suspension if the
Executive is convicted of such felony. For purposes of this Agreement,
"Cause" shall mean (i) repeated violations by the Executive of the Executive's
assigned duties as an employee of the Company (other than as a result of
incapacity due to physical or mental illness) which are demonstrably willful
and deliberate on the Executive's part, which are committed in bad faith or
without reasonable belief that such violations are in the best interests of
the Company, and which are not remedied within thirty (30) days after receipt
of written notice from the Company specifying such violations or (ii) the
conviction of the Executive of a felony involving moral turpitude.
(c) Good Reason
(i) The Executive's employment may be terminated during the
Effective Period by the Executive for Good Reason (as defined below).
(ii) For purposes of this Agreement, "Good Reason" shall
mean:
(A) The assignment to the Executive of any duties
inconsistent in any material respect with the Executive's position (including
status, offices, titles and reporting requirements), authority, duties or
responsibilities as in effect immediately prior to the Effective Date, or any
other action by the Company which results in a diminution in such position,
authority, duties or responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action
6
<PAGE>
not taken in bad faith and which is remedied by the Company within thirty (30)
days after receipt of notice thereof given by the Executive;
(B) Any reduction by the Company in Executive's
compensation or benefits as in effect immediately prior to the Effective Date,
other than an isolated, insubstantial and inadvertent reduction not occurring
in bad faith and which is remedied by the Company promptly after receipt of
notice thereof given by the Executive;
(C) The Company's requiring the Executive to be based
at any office or location more than twenty (20) miles from that in effect
immediately prior to the Effective Date;
(D) Any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by this
Agreement; or
(E) Any failure by the Company to comply with and
satisfy Section 10(c) of this Agreement, provided that such successor has
received at least ten (10) days prior written notice from the Company or the
Executive of the requirements of Section 10(c) of this Agreement. For purposes
of this Section 4(c), any good faith determination of "Good Reason" made by
the Executive shall be conclusive.
(d) Notice of Termination. Any termination by the Company for
Cause, or by the Executive for Good Reason, shall be communicated by a Notice
of Termination to the other party given in accordance with Section 11(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination"
means a written notice which (i) indicates the specific termination
7
<PAGE>
provision in this Agreement relied upon, (ii) to the extent applicable, sets
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the provision so
indicated and (iii) if the Date of Termination (as defined below) is other
than the date of receipt of such notice, specifies the termination date (which
date shall be not more than fifteen (15) days after the giving of such
notice). The failure by the Executive or the Company to set forth in the
Notice of Termination any fact or circumstance which contributes to a showing
of Good Reason or Cause shall not waive any right of the Executive or the
Company hereunder or preclude the Executive or the Company from asserting such
fact or circumstance in enforcing the Executive's or the Company's rights
hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability,
the Date of Termination shall be the date on which the Company notifies the
Executive of such termination, and (iii) if the Executive's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Effective Date, as the
case may be.
5. Obligations of the Company upon Termination
(a) Good Reason; Other Than for Cause, Death or Disability. If,
during the Effective Period, the Company shall terminate the Executive's
employment other than for Cause or Disability, or the Executive shall
terminate employment for Good Reason:
8
<PAGE>
(i) The Company shall pay to the Executive in a lump sum in
cash within thirty (30) days after the Date of Termination the aggregate of
the following amounts:
A. The sum of (1) the Executive's then current annual
base salary through the Date of Termination to the extent not theretofore
paid; (2) the product of (x) Executive's Recent Average Bonus (as defined
below) and (y) a fraction, the numerator of which is the number of days in the
then current fiscal year through the Date of Termination, and the denominator
of which is three hundred and sixty-five (365); (3) any compensation
previously deferred by the Executive (together with any accrued interest or
earnings thereon); and (4) any accrued vacation pay; in each case to the
extent not theretofore paid (the sum of the amounts described in parts (1),
(2), (3) and (4), above, being hereinafter referred to as the "Accrued
Obligations"). For purposes of this Agreement, Executive's Recent Average
Bonus shall be the average annualized (for any fiscal year consisting of less
than twelve (12) full months or with respect to which the Executive has been
employed by the Company for less than twelve (12) full months) bonus paid or
payable, before taking into account any deferral, to the Executive by the
Company and its affiliated companies in respect of the three (3) fiscal years
immediately preceding the fiscal year in which the termination of Executive's
employment occurs; and
B. The amount (such amount being hereinafter referred
to as the "Severance Amount") equal to the product of multiplying (1) the
Executive's then current monthly base salary by (2) the number of months
determined in accordance with Exhibit A attached to this Agreement, which
Exhibit A describes a method of determining a specific number of months on the
basis of the Executive's then current (a) completed years of service with the
Company and its
9
<PAGE>
affiliates, (b) annual base salary and (c) age; provided, however, that such
amount shall be reduced by the present value (determined as provided in
Section 280G(d)(4) of the Internal Revenue Code of 1986, as amended (the
"Code")) of any other amount of severance relating to salary continuation to
be received by the Executive, upon such termination of employment, under any
other severance plan, policy or arrangement of the Company.
(ii) After the Date of Termination, for twenty-four (24)
months or for the number of months determined pursuant to part (2) of Section
5(a)(i)(B), above, whichever period is shorter, or for such longer period as
any other plan, program, practice or policy may provide, the Executive's
employment shall continue under all applicable stock option plans, restricted
stock plans, and other equity incentive plans or programs of the Company and
its affiliates solely for purposes of determining (A) the date(s) on which any
option(s) or similar right(s) shall become exercisable or shall expire and (B)
the date(s) on which any stock restriction(s) shall lapse; provided that if
such continuation is not possible under the provisions of such plans or
programs or under applicable law, the Company shall arrange to provide
benefits to the Executive substantially equivalent in value to those required
to be provided under this subparagraph (ii).
(iii) After the Date of Termination, for twenty-four (24)
months or for the number of months determined pursuant to part (2) of Section
5(a)(i)(B), above, whichever period is shorter, or for such longer period as
any other plan, program, practice or policy may provide, the Company shall
continue benefits to the Executive and/or the Executive's family at least
equal to those which would have been provided to them, if the Executive's
employment had not been terminated, in accordance with (A) the welfare benefit
plans, practices, programs or policies of the
10
<PAGE>
Company and its affiliated companies as in effect and applicable generally to
other peer executives and their families during the ninety (90)-day period
immediately preceding the Effective Date or (B) if more favorable to the
Executive, those in effect generally from time to time thereafter with respect
to other peer executives of the Company and its affiliated companies and their
families (such continuation of such benefits for the applicable period herein
set forth being hereinafter referred to as "Welfare Benefit Continuation");
provided that if such continued coverage is not permitted by the applicable
plans or by applicable law, the Company shall provide the Executive and/or
Executive's family with comparable benefits of equal value; and provided
further that if the Executive becomes reemployed with another employer and is
eligible to receive medical or other welfare benefits under another
employer-provided plan, the medical and other welfare benefits described
herein shall be secondary to those provided under such other plan during such
applicable period of eligibility. For purposes of determining eligibility of
the Executive for retiree benefits pursuant to such plans, practices, programs
and policies, the Executive shall be considered to have remained employed
until the end of the Effective Period and to have retired on the last day of
such period; and
(iv) To the extent not theretofore paid or provided, the
Company shall timely pay or provide to the Executive and/or the Executive's
family any other amounts or benefits required to be paid or provided or which
the Executive and/or the Executive's family is eligible to receive pursuant to
this Agreement or under (A) any other plan, program, policy or practice, or
contract or agreement of the Company and its affiliated companies as in effect
and applicable generally to other peer executives and their families during
the ninety (90)-day period immediately
11
<PAGE>
preceding the Effective Date or (B) if more favorable to the Executive, those
in effect generally from time to time thereafter with respect to other peer
executives of the Company and its affiliated companies and their families
(such other amounts and benefits being hereinafter referred to as the "Other
Benefits").
(b) Death. If the Executive's employment is terminated by reason
of the Executive's death during the Effective Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this Agreement, other than for (i) payment of the Accrued Obligations
(which shall be paid to the Executive's estate or beneficiary, as applicable,
in a lump sum in cash within thirty (30) days of the Date of Termination) and
(ii) the timely payment or provision of the Welfare Benefit Continuation and
Other Benefits.
(c) Disability. If the Executive's employment is terminated by
reason of the Executive's Disability during the Effective Period, this
Agreement shall terminate without further obligations to the Executive, other
than for (i) payment of the Accrued Obligations (which shall be paid to the
Executive in a lump sum in cash within thirty (30) days of the Date of
Termination) and (ii) the timely payment or provision of the Welfare Benefit
Continuation and Other Benefits.
(d) Cause; Other than for Good Reason. If the Executive's
employment shall be terminated for Cause during the Effective Period, this
Agreement shall terminate without further obligations to the Executive other
than the obligation to pay the Executive's then current annual base salary
through the Date of Termination, plus the amount of any compensation
previously deferred by the Executive, in each case to the extent theretofore
unpaid. If the Executive terminates employment during the Effective Period,
excluding a termination for Good Reason, this Agreement
12
<PAGE>
shall terminate without further obligations to the Executive, other than for
(i) the Accrued Obligations and (ii) the timely payment or provision of Other
Benefits. In such case, all Accrued Obligations shall be paid to the
Executive in a lump sum in cash within thirty (30) days of the Date of
Termination.
6. Limitation of Payments.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or distribution by the
Company to or for the benefit of the Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise) would be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code"), then the amount
payable to the Executive pursuant to paragraph (a)(i) of Section 5 of this
Agreement shall be reduced so that it is the maximum amount which can be paid
without any payment or distribution by the Company to or for the benefit of
the Executive (whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise) being subject to the
excise tax imposed by Section 4999 of the Code.
(b) All determinations required to be made under this Section 6
shall be made by McGladrey & Company (the "Accounting Firm"), which shall
provide detailed supporting calculations both to the Company and the Executive
within fifteen (15) business days of receipt of a written request from the
Company or the Executive for a determination as to whether reduction of a
payment is necessary in order to avoid the excise tax imposed by Section 4999
of the Code. In the event that the Accounting Firm is serving as accountant
or auditor for the individual, entity or
13
<PAGE>
group effecting the Change of Control, the Executive shall appoint another
nationally recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by the Company. If the Accounting Firm determines that a payment under
this Agreement (without reduction pursuant to paragraph (a), above) will not
be subject to the excise tax imposed by Section 4999 of the Code, the
Accounting Firm shall furnish the Executive with a written opinion that
failure to report, on the Executive's applicable federal income tax return,
any excise tax in connection with such payment would not result in the
imposition of a negligence or similar penalty. Any good faith determination
by the Accounting Firm shall be binding upon the Company and the Executive.
7. Non-exclusivity of Rights. Except as explicitly provided in this
Agreement, nothing in this Agreement shall prevent or limit the Executive's
continuing or future participation in any plan, program, policy or practice
provided by the Company or any of its affiliated companies and for which the
Executive may qualify, nor shall anything herein limit or otherwise affect
such rights as the Executive may have under applicable law or under any other
contract or agreement with the Company or any of its affiliated companies.
Amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any other plan, policy, practice or program of, or any other
contract or agreement with, the Company or any of its affiliated companies at,
or subsequent to, the Date of Termination shall be payable in accordance with
such plan, policy, practice or program or contract or agreement except as
explicitly modified by this Agreement.
8. Full Settlement; Resolution of Disputes
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(a) The Company's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim,
right or action which the Company may have against the Executive or others. In
no event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Executive
under any of the provisions of this Agreement and, except as provided in
Section 5(a)(iii) of this Agreement, such amounts shall not be reduced whether
or not the Executive obtains other employment. The Company agrees to pay
promptly upon receipt of proper invoices, to the fullest extent permitted by
law, all legal fees and expenses which the Executive may reasonably incur as a
result of any contest by the Company, the Executive or others of the validity
or enforceability of, or liability under, any provision of this Agreement or
any guarantee of performance thereof (including as a result of any contest
initiated by the Executive about the amount of any payment due pursuant to
this Agreement), plus in each case interest on any delayed payment at the
applicable federal rate provided for in Section 7872(f)(2)(A) of the Code;
provided, however, that in the event that it is finally judicially determined
that the Executive was terminated for Cause, then the Executive shall be
obligated to repay to the Company the full amount of all such legal fees and
expenses paid for the Executive by the Company in connection with that
contest, plus interest at the rate described above.
(b) If there shall be any dispute between the Company and the
Executive (i) in the event of any termination of the Executive's employment by
the Company, whether such termination was for Cause, or (ii) in the event of
any termination of employment by the Executive,
15
<PAGE>
whether Good Reason existed, then, unless and until there is a final,
nonappealable judgment by a court of competent jurisdiction declaring that
such termination was for Cause or that the determination by the Executive of
the existence of Good Reason was not made in good faith, the Company shall pay
all amounts, and provide all benefits, to the Executive and/or the Executive's
family or other beneficiaries, as the case may be, that the Company would be
required to pay or provide pursuant to Section 5(a) hereof as though such
termination were by the Company without Cause or by the Executive with Good
Reason; provided, however, that the Company shall not be required to pay any
disputed amounts pursuant to this paragraph except upon receipt of an
undertaking by or on behalf of the Executive and/or the other recipient(s), as
the case may be, to repay all such amounts to which the Executive or other
recipient, as the case may be, is ultimately adjudged by such court not to be
entitled.
9. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its
affiliated companies, and their respective businesses, which shall have been
obtained by the Executive during the Executive's employment by the Company or
any of its affiliated companies and which shall not be or become public
knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement). After termination of the
Executive's employment with the Company, the Executive shall not, without the
prior written consent of the Company or as may otherwise be required by law or
legal process, communicate or divulge any such information, knowledge or data
to anyone other than the Company and those designated by it. However, in no
event shall an asserted violation of the provisions of this Section 9
16
<PAGE>
constitute a basis for deferring or withholding any amounts otherwise payable
to the Executive under this Agreement.
10. Successors
(a) This Agreement is personal to the Executive and, without the
prior written consent of the Company, no obligations or rights hereunder shall
be assignable by the Executive otherwise than by will or the laws of descent
or distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean
the Company as hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this Agreement, by
operation of law or otherwise.
11. Miscellaneous
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Illinois, without reference to principles of
choice of law. The captions of this Agreement are for convenience only and
are not part of the provisions hereof and shall have no
17
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force or effect. This Agreement may not be amended or modified otherwise than
by a written agreement executed by the parties hereto or their respective
successors and legal representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given to the other party by hand delivery or commercial
messenger delivery or by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Executive:
--------------------
Charie A. Zanck
10710 Deerpath Road
Woodstock, IL 60098
If to the Company:
------------------
Amcore Financial, Inc.
501 Seventh Street
P.O. Box 1537
Rockford, Illinois 61110-0037
Attention: Mr. James S. Waddell
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such federal, state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
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<PAGE>
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision hereof or the failure to assert any right that
the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Section 4(c) of this Agreement, shall not be deemed to be a waiver
of such provision or right or of any other provision of or right under this
Agreement.
(f) The Executive and the Company acknowledge that this Agreement
is not a contract of employment and that, except as may otherwise be provided
under any other written agreement between the Executive and the Company, the
employment of the Executive by the Company is, and shall remain during the
Effective Period, "at will" and may, subject to Section 5, above, be
terminated by either the Executive or the Company at any time. Moreover,
subject to Section 1, above, if prior to the Effective Date (i) the
Executive's employment with the Company and all affiliates terminates or (ii)
the Executive ceases to be an officer of the Company and of all affiliates,
then the Executive shall have no further rights under this Agreement.
(g) This Agreement embodies the entire agreement and understanding
between the Company and the Executive and supersedes all prior agreements and
understandings between the Company and Executive relating to the subject
matter hereof.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization of its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
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AMCORE FINANCIAL, INC.
By: /s/ James S. Waddell
-----------------------------------
James S. Waddell
Its Executive Vice President & Chief Administrative Officer
-------------------------------------------------------
/s/ Charie A. Zanck
----------------------------------------
Charie A. Zanck
("Executive")
20
<PAGE>
Exhibit A
---------
1. The number of months to be used in calculating the Severance
Amount under Section 5(a)(i)(B) of the Agreement to which this Exhibit A is
attached is to be determined by multiplying (a) the number of months
determined under paragraph 2, below, by (b) the Applicable Percentage
determined under paragraph 3, below.
2. The following matrix shall be used to determine a specific number
of months on the basis of the Executive's completed years of service with the
Company and its affiliates ("Years of Service") and the Executive's annual
base salary ("Base Salary"):
Years of Service
----------------
Base Salary 0-2 3-5 6-10 11-20 21-30 Over 30
- ----------- --- --- ---- ----- ----- -------
$100,000 and Over 14 16 18 20 24 28
$75,000 to $99,999 10 12 14 16 20 24
$50,000 to $74,999 6 8 10 12 16 20
$30,000 to $49,999 3 4 6 8 10 12
Less than $30,000 2 3 4 5 6 8
Number of Months
----------------
3. The Applicable Percentage shall be determined according to the
following chart on the basis of Executive's age on the Date of Termination,
with that age being determined as of the Executive's most recent birth
anniversary date preceding the Date of Termination:
Age at Date of Termination Applicable Percentage
-------------------------- ---------------------
Under 40 Years 100%
40 to 54 Years 125%
55 to 59 Years 150%
60 Years and Over 200%
EXHIBIT 99
News Release
Date:
July 24, 1997
Contact:
Katherine Taylor AMCORE
Investor Relations Manager FINANCIAL, INC.
815-961-7164
John Hecht
Chief Financial Officer
815-961-7003
AMCORE ANNOUNCES SECOND QUARTER EARNINGS
SECOND QUARTER HIGHLIGHTS
-------------------------
- OPERATING EARNINGS PER SHARE INCREASED 9.1%.
- LOAN GROWTH WAS UP 15% ANNUALIZED, OR $60 MILLION.
-- Vibrant economy and expansion of commercial business were
factors.
-- Increased emphasis on building a sales culture also
contributed.
- SPECIAL AFTER TAX CHARGE OF $2.6 MILLION WAS BOOKED FOR AN
INFORMATION SYSTEM OUTSOURCING INITIATIVE UNDER NEGOTIATIONS.
- CONSUMER FINANCE CHARGE-OFFS OF NEARLY $1 MILLION WERE RECORDED
ON SATELLITE DISH RECEIVABLES ORIGINATED IN LATE 1996.
-- Problems have been identified and collection efforts have
been stepped up.
-- Better performance is expected from this portfolio for the
remainder of the year.
ACQUISITION UPDATE
------------------
- WISCONSIN ACQUISITIONS CLOSED.
-- AMCORE now has 13 locations in Wisconsin.
-- Assets in Wisconsin are over $500 million.
- MERGER RELATED AFTER TAX CHARGE OF $1.9 MILLION WAS RECOGNIZED.
FUTURE OUTLOOK
--------------
- PLANS ANNOUNCED TO ACQUIRE INVESTORS MANAGEMENT GROUP, DES MOINES.
-- IMG is Iowa's largest independent asset manager with $1.7
billion in assets under management.
-- The merger of IMG with AMCORE's capital management will create
an investment management firm in the top 15% of asset managers
based on assets under management with $3.5 billion.
AMCORE Financial, Inc.
501 Seventh Street, Post Office Box 1537, Rockford, Illinois 61110-0037
Telephone 815 968-2241
<PAGE>
News Release
Date:
July 24, 1997
Contact:
Katherine Taylor AMCORE
Investor Relations Manager FINANCIAL, INC.
815-961-7164
John Hecht
Chief Financial Officer
815-961-7003
AMCORE ANNOUNCES SECOND QUARTER EARNINGS
ROCKFORD - Robust loan growth and expansion of commercial business
contributed to an increase in income from operations for AMCORE Financial,
Inc. for the period ending June 30, 1997.
"A vibrant economy in the region and an increased emphasis on building a
sales culture within the organization contributed to the growth," said Robert
J. Meuleman, president and chief executive officer. Basic operations were very
strong as demonstrated by a $60 million or 15 percent annualized increase in
loan volume during the second quarter. Mortgage revenues were up 13.7 percent
over last year, resulting from increased market share and originations from
the recent Wisconsin acquisitions. Also, operating expense growth of only 2.1
percent contributed to an improved efficiency ratio.
As a result, earnings per share from operations were 48 cents per share,
up 9.1 percent for the second quarter, and 94 cents per share, an increase of
12.7 percent for the six months ending June 30, 1997. Earnings would have been
even stronger, except for the high charge-offs and related provisions at the
consumer finance co. Charge-offs of nearly $1.0 million were recorded in the
second quarter on satellite dish receivables originated in late 1996.
"We believe the bulk of the problems have been identified and collection
efforts have been stepped up," said Meuleman. "We expect better performance
from this portfolio through the remainder of the year."
During the second quarter, AMCORE recognized a merger related after tax
charge of $1.9 million for two Wisconsin acquisitions. First National
Bancorp., of Monroe, Wis., was acquired April 18. Country Bank Shares, Mount
Horeb, Wis., was acquired July 16. AMCORE now has 13 locations and assets of
over $500 million in Wisconsin.
In addition, an after tax charge of $2.6 million was booked for an
information system outsourcing initiative under negotiations. Total merger and
information system charges are $4.5 million or .28 cents per share.
AMCORE Financial, Inc.
501 Seventh Street, Post Office Box 1537, Rockford, Illinois 61110-0037
Telephone 815 968-2241
<PAGE>
BENEFITS OF ACQUISITIONS AND OUTSOURCING
"I'd like to stress that these charges are normal for a merger, and the
charge we recorded for outsourcing will benefit us in the long-run," says
Meuleman.
The acquisition charges relate to data processing integration expenses,
legal, accounting and investment banking fees and in the case of Country, the
closing of a duplicate facility in Belleville, Wis.
"Wisconsin was our first venture into interstate banking," said Meuleman.
"Both banks are well run, profitable operations that will add significantly to
our company."
The charge for the information systems outsourcing is related to
severance for staff reduction, equipment and software write-offs and
conversion costs. "The move to the outsourcing arrangement will free resources
to focus on the core business, said Meuleman. "Furthermore, our future
expenses relating to information services will be reduced." The expected
benefits are:
- Year 2000 compliant systems;
- Standardized platform;
- Current software releases;
- State of the art technology;
- and ability to redeploy capital.
COMPONENTS OF OPERATING EARNINGS
Several factors have contributed to the increase in operating earnings.
Net interest income rose $1.2 million or 5.0 percent compared to the same
quarter of 1996. The increase is attributed primarily to a 10.2 percent , or
$150.4 million, increase in average loans and higher earnings from the
investment leveraging program.
The investment leveraging program contributed $2.1 million to net
interest income, an increase of approximately $660,000 from the second quarter
of 1996. This increase results from both higher balances of approximately $87
million and a wider spread. While the investment leveraging program
contributed positively to net interest income, it accounted for six basis
points of the decline in the net interest margin to 3.65 when compared to 3.76
percent during the same period in 1996. The core interest margin, which
excludes the effect of the leveraging program, was 4.20 percent, a decline of
five basis points from the same quarter last year, but an increase from the
4.18 percent in the previous quarter.
In addition to the previously mentioned growth in mortgage revenues, the
other financial services subsidiaries continued to have good revenue growth.
Trust and asset management revenues increased $204,000 or 5.6 percent. Total
Vintage Fund assets increased 41 percent to $810 million compared to the same
period in 1996. The Vintage Equity Fund recently received its fourth
consecutive five-star rating from Morningstar. Vintage Equity Fund assets
increased 66 percent to $373 million compared to the same period in 1996.
Revenues from insurance increased $133,000 or 35.5 percent as a result of
new business and a change to recognize income on a gross rather than a net
basis.
<PAGE>
The overall focus of management continues to be to grow revenues while
minimizing the growth of expenditures. While non-interest expense did increase
$471,000, or 2.1 percent, compared to the second quarter of 1996, the increase
in net revenues offset any increase in expenses. Net revenues grew $1.6
million or 4.8 percent, resulting in a reduction in the efficiency ratio to
61.7 percent compared to 63.2 percent for the second quarter of 1996.
REPORT ON ASSET QUALITY
Provisions for loan losses increased $625,000 or 62.6 percent to $1.6
million compared to the second quarter of 1996. The increase relates to higher
charge-offs at the consumer finance co. as previously discussed. The allowance
for loan losses to total loans increased to 1.05 percent at June 30, 1997,
compared to 1.02 percent at the end of the second quarter of 1996.
The allowance for loan losses to non-performing loans remained above 100
percent at 109.8 percent. Total non-performing assets as of June 30, 1997 were
$16.6 million, or .50 percent of total assets. This represents an increase of
$1.2 million, or 8.0 percent, from June 30, 1996, but a decrease of $396,000
or 2.3 percent from March 31, 1997.
AMCORE Financial, Inc., is a northern Illinois financial services holding
company with assets of over $3.6 billion and 41 locations in Illinois and 13
in Wisconsin. The company has five financial services companies: AMCORE
Investment Group, N.A., including trust services, a capital management
company, a brokerage company and the AMCORE Vintage family of mutual funds;
AMCORE Mortgage, Inc.; AMCORE Consumer Finance Company, Inc.; AMCORE Insurance
Group, Inc.; and Rockford Mercantile Agency, Inc., a bill collection service.
AMCORE recently announced plans to combine Investors Management Group
(IMG), Des Moines, with its asset management operations. IMG, with $1.7
billion in assets under management, is Iowa's largest independent asset
manager. Its addition to AMCORE Capital Management, with $1.8 billion in
assets under management, will create an investment management firm with more
than $3.5 billion in assets under management and will rank in the top 15% of
asset managers based on assets under management.
Meuleman says the merger is important because it will further strengthen
and complement AMCORE's capital management operation. AMCORE is primarily
known as an equity management firm and is the advisor and manager of the
nationally recognized AMCORE Vintage Funds. IMG is primarily known for its
fixed income expertise. The strengths of both businesses will allow new
cross-selling opportunities and will improve product lines.
This news release, other than historical financial and other information,
may consist of forward looking statements that involve risks and
uncertainties, including the risks detailed from time-to-time in the company's
SEC reports, including its Annual Report on Form 10-K for the year ended Dec.
31, 1996. Actual results may vary materially.
AMCORE common stock is listed on NASDAQ under the symbol "AMFI." AMCORE
Financial Inc. may be reached on the Internet at http://www.AMCORE.com.
###
<PAGE>
AMCORE Financial, Inc.
CONSOLIDATED KEY FINANCIAL DATA SUMMARY
NOTE: All prior year amounts have been restated to reflect the merger with
First National Bancorp, Inc. on April 18, 1997. This merger was
accounted for under the pooling of interests method.
(in thousands, except share data)
<TABLE>
<CAPTION>
Quarter Ended June 30, Six Months Ended June 30,
------------------------------------- ------------------------------------
Percent Percent
Financial Highlights 1997 1996 Change 1997 1996 Change
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net revenues, including security gains..... $ 34,495 $ 32,925 4.8% $ 70,261 $ 64,719 8.6%
Operating expenses......................... 22,601 22,131 2.1% 46,187 44,472 3.9%
Net income from operations................. 7,635 7,110 7.4% 15,156 13,361 13.4%
Net income................................. 3,127 7,110 -56.0% 10,648 13,361 -20.3%
Net income per share from operations....... 0.48 0.44 9.1% 0.94 0.83 12.7%
Net income per share....................... 0.20 0.44 -54.5% 0.66 0.83 -20.5%
Cash dividends per share................... 0.16 0.16 0.0% 0.32 0.32 0.0%
Book value per share....................... 15.34 14.90 2.9%
Trailing Twelve Months Ended June 30,
-------------------------------------
Percent
Financial Highlights 1997 1996 Change
- ----------------------------------------------------------------------------------
Net revenues, including security gains..... $140,254 $127,554 10.0%
Operating expenses......................... 91,310 87,342 4.5%
Net income from operations................. 30,996 27,209 13.9%
Net income................................. 26,487 27,209 -2.6%
Net income per share from operations....... 1.93 1.36 41.9%
Net income per share....................... 1.64 1.36 20.6%
Cash dividends per share................... 0.64 0.62 3.2%
Book value per share.......................
</TABLE>
<TABLE>
<CAPTION>
Quarter Ended June 30, Six Months Ended June 30,
------------------------------- -------------------------------
Percent Percent
Key Financial Ratios (A) 1997 1996 Change 1997 1996 Change
- ------------------------------------------------------------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C>
Return on average assets.................. 0.99% 0.99% 0.00% 1.00% 0.96% 0.04%
Return on average equity.................. 12.82% 12.97% -0.15% 12.74% 12.01% 0.73%
Net interest margin (FTE)................. 3.65% 3.76% -0.11% 3.66% 3.83% -0.17%
Core interest margin (FTE)................ 4.20% 4.25% -0.05% 4.19% 4.23% -0.04%
Other income/net revenues (B)............. 27.99% 27.93% 0.06% 29.20% 27.78% 1.42%
Efficiency Ratio (FTE).................... 61.70% 63.20% -1.50% 62.02% 64.80% -2.78%
(A) All 1997 ratios have been adjusted to exclude merger-related and
information systems charges recorded in the second quarter.
(B) Excluding net security gains.
Income Statement
- ------------------------------------------------------------------------------------- -------------------------------
Interest income.............................. $57,194 $52,655 8.6% $112,505 101,341 11.0%
Interest expense............................. 32,464 29,111 11.5% 63,480 55,339 14.7%
------------------------------- -------------------------------
Net interest income....................... 24,730 23,544 5.0% 49,025 46,002 6.6%
Provision for loan losses.................... 1,623 998 62.6% 3,499 1,916 82.6%
Other Income:
Trust and asset management income............ 3,855 3,651 5.6% 7,711 7,002 10.1%
Service charges on deposits............... 1,844 1,772 4.1% 3,579 3,503 2.2%
Mortgage revenues......................... 1,188 1,045 13.7% 1,529 1,879 -18.6%
Insurance revenues........................ 508 375 35.5% 956 634 50.8%
Collection fee income..................... 547 564 -3.0% 1,172 1,146 2.3%
Other..................................... 1,669 1,719 -2.9% 5,275 3,534 49.3%
------------------------------- -------------------------------
Total other income..................... 9,611 9,126 5.3% 20,222 17,698 14.3%
Net security gains........................... 154 255 -39.6% 1,014 1,019 -0.5%
Operating expenses:
Personnel costs........................... 12,653 12,719 -0.5% 26,468 25,468 3.9%
Net occupancy expense..................... 1,463 1,448 1.0% 2,990 3,006 -0.5%
Equipment expense......................... 1,990 1,885 5.6% 3,845 3,795 1.3%
Professional fees......................... 644 669 -3.7% 1,600 1,324 20.8%
Amortization of intangible assets......... 512 523 -2.1% 1,024 1,045 -2.0%
Insurance expense......................... 232 217 6.9% 490 428 14.5%
Other..................................... 5,107 4,670 9.4% 9,770 9,406 3.9%
------------------------------- -------------------------------
Total operating expenses............... 22,601 22,131 2.1% 46,187 44,472 3.9%
------------------------------- -------------------------------
Income before income taxes................... 10,271 9,796 4.8% 20,575 18,331 12.2%
Income taxes................................. 2,636 2,686 -1.9% 5,419 4,970 9.0%
------------------------------- -------------------------------
Net income from operations................... $ 7,635 $ 7,110 7.4% $ 15,156 $ 13,361 13.4%
Merger related charges, net of tax ....... 1,909 0 N/M 1,909 0 N/M
Information systems charge, net of tax.... 2,599 0 N/M 2,599 0 N/M
------------------------------- -------------------------------
Net income................................... $ 3,127 $ 7,110 -56.0% $ 10,648 $ 13,361 -20.3%
=============================== ===============================
Average shares outstanding (000)............. 16,220 16,034 1.2% 16,199 16,017 1.1%
Ending shares outstanding (000).............. 16,242 16,045 1.2% 16,242 16,045 1.2%
</TABLE>
<PAGE>
AMCORE Financial, Inc.
<TABLE>
<CAPTION>
Quarter Ended June 30,
(in thousands) 1997 1996
- ----------------------------------------------------------- ----------------------------------------------
Ending Average Yield/ Average Yield/
Balance Balance Rate Balance Rate
- ----------------------------------------------------------- ----------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets:
Taxable securities........................ $1,104,297 $ 986,698 6.86% $ 958,413 6.45%
Tax-exempt securities (FTE)............... 308,683 281,929 8.07% 260,318 8.71%
Other earning assets...................... 7,434 13,785 5.05% 8,431 5.31%
Mortgage loans held for sale.............. 14,049 10,389 7.66% 10,475 8.97%
Loans, net of unearned income (FTE)....... 1,655,188 1,623,170 8.72% 1,472,818 8.90%
---------- ----------------------------------------------
Total Earning Assets (FTE)............. $3,089,651 $2,915,971 8.07% $2,710,455 8.08%
Intangible assets...................... 11,682 11,897 14,066
Other non-earning assets............... 200,005 164,331 177,342
---------- ----------------------------------------------
Total Assets........................... $3,301,338 $3,092,199 $2,901,863
========== ==============================================
Liabilities and Stockholders' Equity:
Interest bearing deposits................. $1,842,431 $1,812,691 4.74% $1,749,932 4.66%
Non-interest bearing deposits............. 333,771 271,122 253,246
---------- ----------------------------------------------
Total Deposits......................... $2,176,202 $2,083,813 $2,003,178
---------- ----------------------------------------------
Short-term borrowings..................... 694,939 598,467 5.72% 466,326 5.35%
Long-term borrowings...................... 139,145 134,841 6.86% 176,615 6.20%
---------- ----------------------------------------------
Total Interest Bearing Liabilities..... 2,676,515 2,545,999 5.08% 2,392,873 4.91%
Other liabilities...................... 41,861 36,292 35,263
---------- ----------------------------------------------
Total Liabilities...................... $3,052,147 $2,853,413 $2,681,382
Stockholders' Equity................... 249,191 238,786 220,481
---------- ----------------------------------------------
Total Liabilities and
Stockholders' Equity................... $3,301,338 $3,092,199 $2,901,863
========== ==============================================
Six Months Ended June 30,
1997 1996
- --------------------------------------------- ----------------------------------------------
Average Yield/ Average Yield/
Balance Rate Balance Rate
- --------------------------------------------- ----------------------------------------------
Assets:
Taxable securities........................ $ 993,382 6.80% $ 877,854 6.42%
Tax-exempt securities (FTE)............... 273,268 8.15% 245,104 8.73%
Other earning assets...................... 11,134 5.32% 12,825 5.43%
Mortgage loans held for sale.............. 9,660 6.94% 10,628 7.88%
Loans, net of unearned income (FTE)....... 1,605,648 8.70% 1,453,187 8.84%
----------------------------------------------
Total Earning Assets (FTE)............. $2,893,092 8.04% $2,599,598 8.08%
Intangible assets...................... 12,174 14,334
Other non-earning assets............... 165,206 173,242
----------------------------------------------
Total Assets........................... $3,070,472 $2,787,174
==============================================
Liabilities and Stockholders' Equity:
Interest bearing deposits................. $1,795,893 4.72% $1,720,672 4.60%
Non-interest bearing deposits............. 271,243 251,729
----------------------------------------------
Total Deposits......................... $2,067,136 $1,972,401
----------------------------------------------
Short-term borrowings..................... 604,472 5.65% 402,844 5.29%
Long-term borrowings...................... 122,470 6.57% 153,712 6.42%
----------------------------------------------
Total Interest Bearing Liabilities..... 2,522,835 5.03% 2,277,228 4.84%
Other liabilities...................... 36,406 34,494
----------------------------------------------
Total Liabilities...................... $2,830,484 $2,563,451
Stockholders' Equity................... 239,988 223,723
----------------------------------------------
Total Liabilities and
Stockholders' Equity................... $3,070,472 $2,787,174
==============================================
</TABLE>
<TABLE>
<CAPTION>
----------------------------------- --------------------------
Quarter Ended June 30, Six Months Ended June 30,
----------------------------------- --------------------------
Percent Percent
Asset Quality (in thousands) 1997 1996 Change 1997 1996 Change
- ------------------------------------------------------------------------------------ --------------------------
<S> <C> <C> <C> <C> <C> <C>
Ending allowance for loan losses............. $ 17,309 $ 15,449 12.0%
Net charge-offs.............................. 1,765 439 302.1% 2,896 1,169 147.7%
Net charge-offs to average loans (B)......... 0.43% 0.12% 0.31% 0.36% 0.16% 0.20%
Non-performing assets:
Nonaccrual................................ $ 15,351 $ 12,861 19.4%
Restructured.............................. 413 1,726 -76.1%
-----------------------------------
Non-performing loans................... 15,764 14,587 8.1%
Other real estate owned (OREO)............ 823 766 7.4%
-----------------------------------
Total non-performing assets............ $ 16,587 $ 15,353 8.0%
===================================
Loans 90 days past due and still accruing.... $ 5,924 $ 2,169 173.1%
(B) On an annualized basis.
Key Asset Quality Ratios
- ---------------------------------------------
Allowance to ending loans................. 1.05% 1.02% 0.03%
Allowance to non-performing loans......... 109.80% 105.91% 3.89%
Non-performing loans to loans............. 0.95% 0.97% -0.02%
Non-performing assets to loans & OREO..... 1.00% 1.02% -0.02%
Non-performing assets to total assets..... 0.50% 0.52% -0.02%
Capital Adequacy
- ------------------------------------------------------------------------------------
Total risk-based capital.................. 15.31% 13.33% 1.98%
Tier 1 risk-based capital................. 14.41% 12.44% 1.97%
Leverage ratio............................ 9.08% 7.46% 1.62%
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 106,061
<INT-BEARING-DEPOSITS> 867
<FED-FUNDS-SOLD> 6,567
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,416,238
<INVESTMENTS-CARRYING> 10,791
<INVESTMENTS-MARKET> 10,831
<LOANS> 1,655,188
<ALLOWANCE> 17,309
<TOTAL-ASSETS> 3,301,338
<DEPOSITS> 2,123,842
<SHORT-TERM> 747,299
<LIABILITIES-OTHER> 41,861
<LONG-TERM> 139,145
0
0
<COMMON> 5,603
<OTHER-SE> 243,588
<TOTAL-LIABILITIES-AND-EQUITY> 3,301,338
<INTEREST-LOAN> 35,476
<INTEREST-INVEST> 20,854
<INTEREST-OTHER> 864
<INTEREST-TOTAL> 57,194
<INTEREST-DEPOSIT> 21,435
<INTEREST-EXPENSE> 32,370
<INTEREST-INCOME-NET> 24,824
<LOAN-LOSSES> 1,623
<SECURITIES-GAINS> 154
<EXPENSE-OTHER> 29,171
<INCOME-PRETAX> 3,795
<INCOME-PRE-EXTRAORDINARY> 3,127
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,127
<EPS-PRIMARY> .20
<EPS-DILUTED> .20
<YIELD-ACTUAL> 3.65
<LOANS-NON> 15,351
<LOANS-PAST> 5,924
<LOANS-TROUBLED> 413
<LOANS-PROBLEM> 26,038
<ALLOWANCE-OPEN> 17,451<F1>
<CHARGE-OFFS> 2,056
<RECOVERIES> 291
<ALLOWANCE-CLOSE> 17,309
<ALLOWANCE-DOMESTIC> 12,309
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 5,000
<FN>
<F1>The allowance for loan loss-beginning of period has been restated to include
FNB Monroe, Inc., which was acquired on April 18, 1997.
</FN>
</TABLE>
