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, 1999
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
$.22 per share, at July 31, 1999 was 28,304,346 shares.
Index of Exhibits on Page 28
<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, 1999 and
December 31, 1998........................................... 1
Consolidated Statements of Income for the Three and Six
Months Ended June 30, 1999 and 1998......................... 2
Consolidated Statements of Stockholders' Equity as of
June 30, 1999 and 1998...................................... 3
Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 1999 and 1998......................... 4
Notes to Consolidated Financial Statements..................... 5
ITEM 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations....................................... 12
PART II
ITEM 4 Submission of Matters to a Vote of Security Holders............... 28
ITEM 6 Exhibits and Reports on Form 10-Q................................. 28
Signatures............................................................... 29
<PAGE>
AMCORE FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
(in thousands, except per share data) 1999 1998
============================================================================================================================
<S> <C> <C> <C>
ASSETS Cash and cash equivalents.................................................... $120,609 $144,199
Interest earning deposits in banks........................................... 29,877 13,397
Federal funds sold and other short-term investments.......................... 2,550 9,427
Loans held for sale.......................................................... 18,687 46,836
Securities available for sale................................................ 1,285,791 1,327,532
Securities held to maturity (fair value of $ 14,614 in 1999; $ 16,371 in 1998) 14,626 16,142
-------------------------------
Total securities ........................................................ $1,300,417 $1,343,674
Loans and leases, net of unearned income..................................... 2,590,655 2,451,518
Allowance for loan and lease losses.......................................... (27,636) (26,403)
-------------------------------
Net loans and leases..................................................... $2,563,019 $2,425,115
Premises and equipment, net ................................................. 57,402 58,763
Intangible assets, net....................................................... 18,099 19,028
Foreclosed real estate....................................................... 3,090 2,321
Other assets................................................................. 94,610 85,073
-------------------------------
TOTAL ASSETS............................................................. $4,208,360 $4,147,833
===============================
LIABILITIES LIABILITIES
AND Deposits:
STOCKHOLDERS' Demand deposits............................................................ $1,157,726 $1,169,835
EQUITY Savings deposits........................................................... 162,726 182,330
Other time deposits........................................................ 1,604,186 1,595,559
-------------------------------
Total deposits.......................................................... $2,924,638 $2,947,724
Short-term borrowings........................................................ 631,636 498,211
Long-term borrowings ........................................................ 297,779 330,361
Other liabilities............................................................ 54,806 55,454
-------------------------------
TOTAL LIABILITIES....................................................... $3,908,859 $3,831,750
-------------------------------
STOCKHOLDERS' EQUITY
Preferred stock, $1 par value: authorized 10,000,000 shares; none issued.... $ - $ -
Common stock, $.22 par value: authorized 45,000,000 shares;
June 30, December 31,
1999 1998
---- ----
Issued 29,605,297 29,593,495
Outstanding 28,289,478 28,837,698 6,575 6,572
Additional paid-in capital................................................... 74,713 75,260
Retained earnings ........................................................... 256,739 247,486
Deferred compensation for non-employee directors............................. (1,804) (1,706)
Treasury stock .............................................................. (21,104) (8,263)
Accumulated other comprehensive loss......................................... (15,618) (3,266)
-------------------------------
TOTAL STOCKHOLDERS' EQUITY.............................................. $299,501 $316,083
-------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.............................. $4,208,360 $4,147,833
===============================
</TABLE>
See accompanying notes to consolidated financial statements.
1
<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) 1999 1998 1999 1998
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
INTEREST Interest and fees on loans and leases............................. $52,937 $48,594 $104,374 $91,583
INCOME Interest on securities:
Taxable......................................................... 15,894 20,678 32,263 40,811
Tax-exempt...................................................... 4,332 4,458 8,635 8,766
----------------------- -----------------------
TOTAL INCOME FROM SECURITIES................................. $20,226 $25,136 $40,898 $49,577
----------------------- -----------------------
Interest on federal funds sold and other short-term investments... $39 $28 $92 $132
Interest and fees on loans held for sale.......................... 496 647 1,120 1,398
Interest on deposits in banks..................................... 204 115 310 145
----------------------- -----------------------
TOTAL INTEREST INCOME........................................ $73,902 $74,520 $146,794 $142,835
----------------------- -----------------------
INTEREST Interest on deposits.............................................. $28,497 $29,385 $57,071 $56,485
EXPENSE Interest on short-term borrowings................................. 8,125 9,867 15,809 18,959
Interest on long-term borrowings.................................. 4,618 4,050 9,469 7,220
----------------------- -----------------------
TOTAL INTEREST EXPENSE....................................... $41,240 $43,302 $82,349 $82,664
----------------------- -----------------------
NET INTEREST INCOME.......................................... $32,662 $31,218 $64,445 $60,171
Provision for loan and lease losses............................... 2,151 1,642 4,377 3,787
----------------------- -----------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES $30,511 $29,576 $60,068 $56,384
----------------------- -----------------------
Trust and asset management income................................. $7,709 $5,993 $14,296 $11,254
NON-INTEREST Service charges on deposits....................................... 2,408 2,185 4,626 4,049
INCOME Mortgage revenues................................................. 1,957 2,437 4,095 5,075
Other............................................................. 2,621 2,742 5,247 5,376
----------------------- -----------------------
NON-INTEREST INCOME, EXCLUDING NET REALIZED SECURITY GAINS... $14,695 $13,357 $28,264 $25,754
Net realized security gains....................................... 379 541 572 1,083
----------------------- -----------------------
TOTAL NON-INTEREST INCOME.................................... $15,074 $13,898 $28,836 26,837
Compensation expense.............................................. $16,040 $12,848 $29,025 $25,403
OPERATING Employee benefits................................................. 3,458 3,258 7,198 6,802
EXPENSES Net occupancy expense............................................. 1,622 1,644 3,351 3,357
Equipment expense................................................. 2,463 1,978 4,568 4,124
Data processing expense........................................... 2,813 441 4,414 2,216
Professional fees................................................. 2,307 740 3,438 3,419
Advertising and business development.............................. 1,017 912 1,763 1,794
Amortization of intangible assets................................. 498 685 995 1,271
Other............................................................. 6,270 5,426 11,094 11,452
----------------------- -----------------------
TOTAL OPERATING EXPENSES..................................... $36,488 $27,932 $65,846 $59,838
----------------------- -----------------------
INCOME BEFORE INCOME TAXES........................................ $9,097 $15,542 $23,058 $23,383
Income taxes...................................................... 1,971 4,306 5,896 6,048
======================= =======================
NET INCOME................................................... $7,126 $11,236 $17,162 $17,335
======================= =======================
BASIC EARNINGS PER COMMON SHARE................................... $ 0.25 $ 0.39 $0.61 $0.62
DILUTED EARNINGS PER COMMON SHARE................................. 0.25 0.38 0.60 0.61
DIVIDENDS PER COMMON SHARE........................................ 0.14 0.14 0.28 0.26
AVERAGE COMMON SHARES OUTSTANDING................................. 28,252 29,047 28,363 28,078
AVERAGE DILUTED SHARES OUTSTANDING................................ 28,659 29,635 28,800 28,608
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
AMCORE FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
(in thousands, except share data) STOCK CAPITAL EARNINGS
---------------------------------------
<S> <C> <C> <C>
Balance at December 31, 1997................................................... $ 6,152 $ 73,262 $ 206,235
---------------------------------------
Comprehensive Income:
Net Income................................................................... - - 17,335
Unrealized holding losses on securities available for sale arising
during the period........................................................ - - -
Less reclassification adjustment for realized gains included in net income.. - - -
---------------------------------------
Net unrealized gains (losses) on securities available for sale................ - - -
---------------------------------------
Comprehensive Income........................................................... - - 17,335
---------------------------------------
Cash dividends on common stock-$.26 per share................................ - - (7,317)
Issuance of common shares for Midwest Federal Financial Corp................. 420 2,314 17,074
Reissuance of treasury shares for Investors Management Group................ - 680 -
Purchase of shares for the treasury.......................................... - - -
Reissuance of treasury shares for Non-Employee
Directors stock plan....................................................... - 282 -
Deferred compensation expense................................................ - - -
Reissuance of treasury shares for employee benefit plans..................... - 1,087 -
---------------------------------------
BALANCE AT JUNE 30, 1998....................................................... $ 6,572 $ 77,625 $ 233,327
---------------------------------------
---------------------------------------
BALANCE AT DECEMBER 31, 1998................................................... $ 6,572 $ 75,260 $ 247,486
---------------------------------------
Comprehensive Income:
Net Income................................................................... - - 17,162
Unrealized holding losses on securities available for sale arising
during the period........................................................ - - -
Less reclassification adjustment for realized gains included in net income.. - - -
---------------------------------------
Net unrealized gains (losses) on securities available for sale................ - - -
---------------------------------------
Comprehensive Income........................................................... - - 17,162
---------------------------------------
Cash dividends on common stock-$.28 per share................................ - - (7,909)
Purchase of shares for the treasury.......................................... - - -
Issuance of common shares for employee stock plan............................ 3 207 -
Reissuance of treasury shares for Non-Employee
Directors stock plan....................................................... - (8) -
Deferred compensation expense................................................ - - -
Reissuance of treasury shares for employee benefit plans..................... - (746) -
---------------------------------------
BALANCE AT JUNE 30, 1999....................................................... $.6,575 $ 74,713 $ 256,739
---------------------------------------
</TABLE>
<TABLE>
<CAPTION>
DEFERRED ACCUMULATED
COMPENSATION OTHER TOTAL
NON-EMPLOYEE TREASURY COMPREHENSIVE STOCKHOLDERS'
(in thousands, except share data) DIRECTORS STOCK INCOME EQUITY
----------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1997................................................... $ (1,478) $ (5,069) $ 8,374 $ 287,476
----------------------------------------------------
Comprehensive Income:
Net Income................................................................... - - - 17,335
Unrealized holding losses on securities available for sale arising
during the period........................................................ - - (2,985) (2,985)
Less reclassification adjustment for realized gains included in net income.. - - (650) (650)
----------------------------------------------------
Net unrealized gains (losses) on securities available for sale................ - - (3,635) (3,635)
----------------------------------------------------
Comprehensive Income........................................................... - - (3,635) 13,700
----------------------------------------------------
Cash dividends on common stock-$.26 per share................................ - - - (7,317)
Issuance of common shares for Midwest Federal Financial Corp................. - - 178 19,986
Reissuance of treasury shares for Investors Management Group................ - 6,242 - 6,922
Purchase of shares for the treasury.......................................... - (5,513) - (5,513)
Reissuance of treasury shares for Non-Employee
Directors stock plan....................................................... (573) 291 - -
Deferred compensation expense................................................ 265 - - 265
Reissuance of treasury shares for employee benefit plans..................... - 1,205 - 2,292
----------------------------------------------------
BALANCE AT JUNE 30, 1998....................................................... $ (1,786) $ (2,844) $ 4,917 $ 317,811
----------------------------------------------------
----------------------------------------------------
BALANCE AT DECEMBER 31, 1998................................................... $ (1,706) $ (8,263) $ (3,266) $ 316,083
----------------------------------------------------
Comprehensive Income:
Net Income................................................................... - - - 17,162
Unrealized holding losses on securities available for sale arising
during the period........................................................ - - (12,009) (12,009)
Less reclassification adjustment for realized gains included in net income.. - - (343) (343)
----------------------------------------------------
Net unrealized gains (losses) on securities available for sale................ - - (12,352) (12,352)
----------------------------------------------------
Comprehensive Income........................................................... - - (12,352) 4,810
----------------------------------------------------
Cash dividends on common stock-$.28 per share................................ - - - (7,909)
Purchase of shares for the treasury.......................................... - (16,875) - (16,875)
Issuance of common shares for employee stock plan............................ - - - 210
Reissuance of treasury shares for Non-Employee
Directors stock plan....................................................... (361) 369 - -
Deferred compensation expense................................................ 263 - - 263
Reissuance of treasury shares for employee benefit plans..................... - 3,665 - 2,919
----------------------------------------------------
BALANCE AT JUNE 30, 1999....................................................... $ (1,804) $ (21,104) $ (15,618) $ 299,501
----------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
AMCORE FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(UNAUDITED) SIX MONTHS ENDED
JUNE 30,
(in thousands) 1999 1998
==============================================================================================================================
<S> <C> <C> <C>
CASH FLOWS Net income.................................................................... $ 17,162 $ 17,335
FROM Adjustments to reconcile net income to net
OPERATING cash provided by operating activities:
ACTIVITIES Depreciation and amortization of premises and equipment.................. 3,582 3,447
Amortization and accretion of securities, net............................ 5,924 4,341
Provision for loan and lease losses...................................... 4,377 3,787
Amortization of intangible assets........................................ 995 1,271
Net gain on sale of securities available for sale........................ (572) (1,083)
Deferred income taxes.................................................... 1,190 (575)
Originations of loans held for sale...................................... (166,573) (212,717)
Proceeds from sales of loans held for sale............................... 194,722 216,860
Other, net............................................................... (3,025) 8,179
--------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES............................. $ 57,782 $ 40,845
--------------------------
CASH FLOWS Proceeds from maturities of securities available for sale..................... $ 210,703 $ 192,732
FROM Proceeds from maturities of securities held to maturity....................... 1,516 1,255
INVESTING Proceeds from sales of securities available for sale.......................... 101,667 173,444
ACTIVITIES Purchase of securities available for sale..................................... (296,250) (485,972)
Net decrease (increase) in federal funds sold
and other short-term investments........................................... 6,877 (967)
Net increase in interest earning deposits in banks............................ (16,480) (5,634)
Proceeds from the sale of credit card receivables............................. - 5,756
Proceeds from the sale of loans and leases.................................... 22,756 3,056
Loans made to customers and principal collection of loans, net................ (166,518) (128,150)
Premises and equipment expenditures, net...................................... (2,269) (2,532)
Proceeds from the sale of other real estate................................... 780 792
Net cash and cash equivalents acquired through acquisitions................... - 5,763
--------------------------
NET CASH USED FOR INVESTING ACTIVITIES................................ $(137,218) (240,457)
--------------------------
CASH FLOWS Net (decrease) increase in demand deposits and savings accounts............... ($31,713) $42,922
FROM Net increase in time deposits................................................. 8,627 21,323
FINANCING Net increase in short-term borrowings......................................... 99,775 94,779
ACTIVITIES Proceeds from long-term borrowings............................................ 1,500 84,800
Payment of long-term borrowings............................................... (478) (478)
Dividends paid................................................................ (7,909) (7,317)
Issuance of treasury stock for employee incentive plans....................... 2,919 2,262
Purchase of treasury stock.................................................... (16,875) (5,513)
--------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES............................. $ 55,846 $ 232,778
--------------------------
Net change in cash and cash equivalents....................................... $ (23,590) $ 33,166
Cash and cash equivalents:
Beginning of year........................................................... 144,199 105,218
--------------------------
End of period............................................................... $ 120,609 $ 138,384
==========================
SUPPLEMENTAL Cash payments for:
DISCLOSURES OF Interest paid to depositors................................................. $ 58,605 $ 55,781
CASH FLOW Interest paid on borrowings................................................. 25,911 27,001
INFORMATION Income taxes paid........................................................... 6,197 2,885
NON-CASH Other real estate acquired in settlement of loans............................. 1,577 893
ACTIVITIES Transfer of long-term borrowings to short-term borrowings..................... 33,650 1,500
Common stock issued for Midwest Federal Financial Corp........................ - 19,986
Common stock issued for Investors Management Group, Ltd....................... - 6,922
</TABLE>
See accompanying notes to consolidated financial statements.
4
<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 financial position and results of
operations for the periods shown.
On March 27, 1998, Midwest Federal Financial Corp. (Midwest) merged into the
company. This transaction was accounted for as a pooling of interests, however,
the size of the transaction was not material to the Company's consolidated
financial statements. Therefore, results previous to the date of acquisition
were not restated. On February 17, 1998, Investors Management Group, LTD (IMG)
was acquired by the Company. This transaction was accounted for as a purchase.
The results of IMG's operations have been included in the Company's operating
results since February 17, 1998.
Operating results for the three and six month periods ended June 30, 1999 are
not necessarily indicative of the results that may be expected for the fiscal
year ending December 31, 1999. 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, 1998.
NOTE 2 - EARNINGS PER SHARE
Basic earnings per share is based on dividing net income by the weighted average
number of shares of common stock outstanding. The weighted average common shares
outstanding were 28,252,000 and 29,047,000 for the three months ended June 30,
1999 and 1998, respectively, and 28,363,000 and 28,078,000 for the six months
ended June 30, 1999 and 1998, respectively. Diluted earnings per share reflects
the potential dilution using the treasury stock method that could occur if stock
options granted pursuant to incentive stock plans were exercised or converted
into common stock, and any shares contingently issuable, that then shared in the
earnings of the Company. The weighted average diluted shares outstanding were
28,659,000 and 29,635,000 for the three months ended June 30, 1999 and 1998,
respectively, and 28,800,000 and 28,608,000 for the six months ended June 30,
1999 and 1998, respectively.
5
<PAGE>
NOTE 3 - SECURITIES
A summary of securities at June 30, 1999 and December 31, 1998 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, 1999
Securities Available for Sale:
U.S. Treasury $ 65,276 $ 349 $ (235) $ 65,390
U.S. Government agencies 38,006 32 (166) 37,872
Agency mortgage-backed securities 742,546 1,076 (23,552) 720,070
State and political subdivisions 332,575 3,783 (5,523) 330,835
Corporate obligations and other 133,152 165 (1,693) 131,624
----------------------------------------------------------------
Total Securities Available for Sale $ 1,311,555 $ 5,405 $ (31,169) $ 1,285,791
----------------------------------------------------------------
Securities Held to Maturity:
U.S. Treasury $ 1,050 $ 3 $ - $ 1,053
U.S. Government agencies 27 - - 27
State and political subdivisions 13,548 124 (139) 13,533
Corporate obligations and other 1 - - 1
----------------------------------------------------------------
Total Securities Held to Maturity $ 14,626 $ 127 $ (139) $ 14,614
----------------------------------------------------------------
Total Securities $ 1,326,181 $ 5,532 $ (31,308) $ 1,300,405
================================================================
At December 31, 1998
Securities Available for Sale:
U.S. Treasury $ 66,431 $ 1,047 $ (19) $ 67,459
U.S. Government agencies 82,814 701 (2) 83,513
Agency mortgage-backed securities 727,506 4,645 (22,308) 709,843
State and political subdivisions 312,116 11,489 (374) 323,231
Corporate obligations and other 144,106 586 (1,206) 143,486
----------------------------------------------------------------
Total Securities Available for Sale $ 1,332,973 $ 18,468 $ (23,909) $ 1,327,532
----------------------------------------------------------------
Securities Held to Maturity:
U.S. Treasury $ 1,053 $ 15 $ - $ 1,068
U.S. Government agencies 27 - - 27
State and political subdivisions 15,061 261 (47) 15,275
Corporate obligations and other 1 - - 1
----------------------------------------------------------------
Total Securities Held to Maturity $ 16,142 $ 276 $ (47) $ 16,371
----------------------------------------------------------------
Total Securities $ 1,349,115 $ 18,744 $ (23,956) $ 1,343,903
================================================================
</TABLE>
Realized gross gains resulting from the sale of securities available for sale
were $529,000 and $598,000 for the three months ended June 30, 1999 and 1998,
respectively, and $835,000 and $1,196,000 for the six months ended June 30, 1999
and 1998, respectively. Realized gross losses were $150,000 and $57,000 for the
three months ended June 30, 1999 and 1998, respectively, and $263,000 and
$113,000 for the six months ended June 30, 1999 and 1998, respectively.
6
<PAGE>
NOTE 4 - LOANS AND LEASES
The composition of the loan and lease portfolio at June 30, 1999 and December
31, 1998, was as follows:
JUNE 30, DECEMBER 31,
(in thousands) 1999 1998
--------------------------------
Commercial, financial and agricultural........ $692,203 $659,946
Real estate-construction...................... 88,456 105,574
Real estate-commercial........................ 683,475 626,358
Real estate-residential....................... 687,149 672,720
Installment and consumer...................... 436,915 384,004
Direct lease financing........................ 2,612 3,127
--------------------------------
Gross loans and leases................... $2,590,810 $2,451,729
Unearned income.......................... (155) (211)
--------------------------------
Loans and leases, net of unearned income. $2,590,655 $2,451,518
Allowance for loan and lease losses...... (27,636) (26,403)
--------------------------------
NET LOANS AND LEASES..................... $2,563,019 $2,425,115
================================
7
<PAGE>
NOTE 5 - BORROWINGS
SHORT-TERM BORROWINGS
Short-term borrowings consisted of the following:
June 30, 1999 December 31, 1998
------------- -----------------
Securities sold under agreements to repurchase.. $480,985 $434,071
Federal Home Loan Bank borrowings............... 89,379 32,629
Federal funds purchased......................... 56,200 29,200
U.S. Treasury tax and loan accounts............. 3,472 2,311
Commercial paper borrowings..................... 1,600 -
- -------------------------------------------------------------------------------
TOTAL SHORT-TERM BORROWINGS..................... $631,636 $498,211
===============================================================================
LONG-TERM BORROWINGS
Several of the Company's subsidiary banks borrow from the Federal Home Loan Bank
(FHLB) to fund mortgage loans and mortgage-backed securities. Certain FHLB
borrowings have prepayment penalties and call features associated with them. The
current balance of these borrowings is $256,573,000 with an average maturity of
6.14 years, and a weighted average borrowing rate of 5.01%.
Other long-term borrowings include $40 million of capital securities issued
through AMCORE Capital Trust I, a statutory business trust. The securities
require semiannual cash distributions at an annual rate of 9.35% and are
redeemable from March 25, 2007 until March 25, 2017, when redemption is
mandatory. Also included in other long-term borrowings is a non-interest bearing
note requiring annual payments of $444,000 through 2002. The note was discounted
at an interest rate of 8.0%
Scheduled reductions of long-term borrowings are as follows at June 30, 1999:
(In thousands) Total
- --------------------------------------------------------------------
1999 ..................................................... $ 55,716
2000 ..................................................... 75,598
2001 ..................................................... 1,998
2002 ..................................................... 65,762
2003 ..................................................... 2,070
Thereafter ............................................... 186,014
- --------------------------------------------------------------------
SUB-TOTAL............................................ $ 358,079
Less current portion of FHLB borrowings .................. (89,379)
- --------------------------------------------------------------------
TOTAL LONG-TERM BORROWINGS........................... $ 297,779
====================================================================
8
<PAGE>
NOTE 6-SEGMENT INFORMATION
The Company's operations include three business segments: Banking, Trust and
Asset Management, and Mortgage Banking. The Banking segment provides commercial
and personal banking services through its 66 banking locations in northern
Illinois and south-central Wisconsin, and the Consumer Finance subsidiary. The
services provided by this segment include lending, deposits, cash management,
safe deposit box rental, automated teller machines, and other traditional
banking services. The Trust and Asset Management segment provides trust,
investment management and brokerage services. It also acts as an advisor and
provides fund administration to the Vintage Mutual Fund family and offers a
complete line of commercial and individual insurance products. These products
are distributed nationally (i.e. Vintage Equity Fund is available through
Charles Schwab), regionally to institutional investors and corporations, and
locally through AMCORE's 66 banking locations. The Mortgage Banking segment
originates residential mortgage loans for sale to the secondary market and
AMCORE's banking affiliates, as well as providing servicing of these mortgage
loans.
The Company's three reportable segments are strategic business units that are
separately managed as they offer different products and services. The Company
evaluates financial performance based on several factors, of which the primary
financial measure is segment profit before remittances to the banking
affiliates. The Company accounts for intersegment revenue, expenses and
transfers at current market prices.
9
<PAGE>
BUSINESS SEGMENTS
<TABLE>
<CAPTION>
TRUST AND ASSET MORTGAGE TOTAL
FOR THE THREE MONTHS ENDED JUNE 30, 1999 BANKING MANAGEMENT BANKING SEGMENTS
(in thousands)
<S> <C> <C> <C> <C>
Net interest income $ 32,656 $ 55 $ 587 $ 33,298
Provision for loan and lease losses 2,151 - - 2,151
Non-interest income 5,304 8,313 2,130 15,747
Operating expenses 27,770 5,333 2,046 35,149
Income taxes 1,435 1,298 271 3,004
Segment profit $ 6,604 $ 1,737 $ 400 $ 8,741
After tax restructuring charges 3,767 - - 3,767
--------------------------------------------------------
Segment profit before restructuring charges $ 10,371 $ 1,737 $ 400 $ 12,508
========================================================
FOR THE THREE MONTHS ENDED JUNE 30, 1998
Net interest income $ 31,205 $ 19 $ 636 $ 31,860
Provision for loan and lease losses 1,642 - - 1,642
Non-interest income 6,951 6,596 2,461 16,008
Operating expenses 21,089 4,700 2,322 28,111
Income taxes 4,114 834 312 5,260
--------------------------------------------------------
Segment profit $ 11,311 $ 1,081 $ 463 $ 12,855
========================================================
TRUST AND ASSET MORTGAGE TOTAL
For the six months ended June 30, 1999 BANKING MANAGEMENT BANKING SEGMENTS
(in thousands)
Net interest income $ 64,222 $ 108 $ 1,246 $ 65,576
Provision for loan and lease losses 4,377 - - 4,377
Non-interest income 10,541 15,478 4,760 30,779
Operating expenses 49,522 10,607 4,190 64,319
Income taxes 4,663 2,152 729 7,544
Segment profit $ 16,201 $ 2,827 $ 1,087 $ 20,115
After tax restructuring charges 3,767 - - 3,767
--------------------------------------------------------
Segment profit before restructuring charges $ 19,968 $ 2,827 $ 1,087 $ 23,882
========================================================
Segment assets $ 4,299,964 $ 18,700 $ 31,494 $ 4,350,158
========================================================
FOR THE SIX MONTHS ENDED JUNE 30, 1998
Net interest income $ 60,271 $ 34 $ 1,219 $ 61,524
Provision for loan and lease losses 3,787 - - 3,787
Non-interest income 11,752 12,379 5,123 29,254
Operating expenses 43,383 8,868 5,089 57,340
Income taxes 5,818 1,523 503 7,844
Segment profit $ 19,035 $ 2,022 $ 750 $ 21,807
After tax merger related charges 1,245 - - 1,245
--------------------------------------------------------
Segment profit before merger related charges $ 20,280 $ 2,022 $ 750 $ 23,052
========================================================
Segment assets $ 4,166,042 $ 15,438 $ 34,949 $ 4,216,430
========================================================
</TABLE>
10
<PAGE>
RECONCILEMENT OF SEGMENT INFORMATION TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
For the three months ended June 30, For the six months ended June 30,
Net interest income and non-interest income 1999 1998 1999 1998
- -------------------------------------------
<S> <C> <C> <C> <C>
Total for segments $ 49,045 $ 47,868 $ 96,355 $90,778
Unallocated revenues:
Holding company revenues 6,253 5,120 12,352 10,234
Other 9 44 25 164
Elimination of intersegment revenues (7,571) (7,916) (15,451) (14,168)
------------------------------ -------------------------------
Consolidated total revenues $ 47,736 $ 45,116 $ 93,281 $87,008
============================== ===============================
Profit
- ------
Total for Segments $ 8,741 $ 12,855 $ 20,115 $21,807
Unallocated profit:
Holding company loss (1,505) (880) (2,563) (3,836)
Other (34) (26) (197) (44)
Elimination of intersegment loss (76) (713) (192) (592)
------------------------------ -------------------------------
Consolidated net income $ 7,126 $ 11,236 $ 17,162 $17,335
============================== ===============================
Assets
- ------
Total for segments $ 4,350,158 $4,216,430
Unallocated assets:
Holding company assets 50,637 43,905
Other 42,558 43,276
Elimination of intersegment assets (234,993) (164,840)
-------------------------------
Consolidated assets $ 4,208,360 $4,138,771
===============================
</TABLE>
11
<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, 1999 as compared to December 31, 1998 and the results of
operations for the three and six months ended June 30, 1999 as compared to the
same periods in 1998. This discussion is intended to be read in conjunction with
the consolidated financial statements and notes thereto appearing elsewhere in
this report.
This review contains 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. Contemplated or projected, forecasted or
estimated results in such forward-looking statements involve certain risks and
uncertainties including, 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 and retain existing customers;
(IV) inability to carry out marketing and/or expansion plans; (V) loss of key
executives; (VI) changes in interest rates including the effect of prepayment;
(VII) general economic and business conditions which are less favorable than
expected; (VIII) unanticipated changes in industry trends; (IX) changes in
Federal Reserve Board monetary policies; (X) inability to realize cost savings
anticipated with the new organizational structure, mergers or data processing
outsourcing; (XI) higher than expected costs or other difficulties associated
with merger integration, data processing conversion or year 2000 compliance
solutions; and (XII) changes in the final organizational structure.
OVERVIEW OF OPERATIONS
AMCORE's net income for the three months ended June 30, 1999 was $7.1 million, a
decrease of 36.6% from the $11.2 million in the 1998 comparable period. The
decrease was caused primarily by $3.8 million of after-tax charges related to
the new organizational structure (the "Restructuring Charge") taken in the
second quarter of 1999. Excluding these charges, second quarter 1999 net income
would have been $10.9 million, a decrease of 3.1% from the same period in 1998.
The earnings for the six months ended June 30, 1999 were $17.2 million, a
decrease of $173,000 or 1.0% from the $17.3 million reported in 1998. Net income
from operations, which excludes the $3.8 million Restructuring Charge in the
second quarter of 1999 and $3.3 million of after-tax merger-related charges (the
"Merger Charge") in the first quarter of 1998, was $20.9 million and $20.6
million for the six months ended June 30, 1999 and 1998, respectively. This
represents an increase of $287,000 or 1.4% in net income from operations, when
comparing the first six months of 1999 and 1998.
12
<PAGE>
Diluted earnings per share were $0.25 and $0.60 for the three and six-month
periods, respectively, ended June 30, 1999. Diluted earnings per share from
operations was $0.38 for both the second quarter of 1999 and 1998. Diluted
earnings per share from operations for the six months ended June 30, 1999 and
1998 were $0.73 and $0.72, respectively, an increase of 1.4%.
Excluding the Restructuring Charge, AMCORE's annualized return on average equity
was 13.92% in the second quarter of 1999 compared to 14.21% for the same period
in 1998. The second quarter return on average assets, excluding the
Restructuring Charge, was 1.04% in 1999 versus 1.11% in 1998.
Net interest income and non-interest income for the second quarter of 1999
increased 4.6% and 8.5%, respectively, over the same period a year ago. A
variety of factors contributed to the increase in net interest income. Average
loans increased 16%, leading to an increase in average earning assets of 3.4%.
In addition, net interest margin improved by 3 basis points to 3.53 percent,
primarily the result of lower average rates on interest-bearing liabilities.
Non-interest income growth was mainly the result of a 29% increase in trust and
asset management revenues, primarily driven by favorable investment performance
and strong sales results.
The improvements in net interest income and non-interest income were offset by
increased provision for loan losses as a result of the loan growth, higher data
processing expenses and investment related expenditures.
On March 31, 1999, AMCORE acquired Wellmark Capital Value, Inc. ("WCV") of Des
Moines, Iowa for $50,000 in cash. An additional $174,000 may be paid over the
next two years, contingent upon the level of customer assets under management.
WCV provides complete recordkeeping and other administrative services to 401(k)
and other tax-qualified retirement plans. The acquisition of WCV will enable
AMCORE to bring plan administration services in-house where it can enhance its
recordkeeping ability and strengthen the relationship with plan sponsors. The
transaction was accounted for using the purchase method of accounting.
On April 27, 1999, AMCORE announced a new "Customer Focused Organizational
Structure" that is expected to improve efficiency, enhance responsiveness to
local markets and increase shareholder value. The new structure will increase
the ability of bank presidents, directors and salespeople to focus on serving
customers and their communities by centralizing or regionalizing certain support
functions. To accomplish this, AMCORE will operate under one charter, while
still preserving its super community banking philosophy. AMCORE expects to have
its new organizational structure in place in the fourth quarter of 1999. The
Restructuring Charge is estimated at $6.4 million pre-tax, of which $6.1 million
was accrued or incurred in the second quarter of 1999. The largest components of
the Restructuring Charge are related to employee severance, professional fees,
and other costs to to combine the bank subsidiaries into one bank and to
integrate their systems. Of the $6.1 million Restructuring Charge included in
the second quarter results of operation, $808,000
13
<PAGE>
was incurred or paid during the second quarter of 1999.
AMCORE's subsidiary banks continue to be "well capitalized" as defined by
regulatory guidelines. At June 30, 1999, AMCORE'S total capital to risk weighted
assets was 12.85%, which is in excess of regulatory requirements.
YEAR 2000
A critical issue has emerged in the banking industry and for the economy overall
regarding how existing application software programs, operating systems and
other systems can accommodate the date value for the year 2000. The year 2000
issue is pervasive, as almost all date-sensitive systems will be affected to
some degree by the rollover to the two-digit year from 99 to 00. Potential risks
of not addressing this issue include business interruption, financial loss,
reputation loss and/or legal liability.
AMCORE has undertaken an enterprise-wide initiative to address the Year 2000
issue. The company has established a project team that reports directly to the
Board of Directors and has developed a comprehensive plan to prepare, as
appropriate, its computer and other systems to recognize the date change on
January 1, 2000. An assessment of the readiness of third parties that AMCORE
interfaces with, such as vendors, counterparties, customers, payment systems,
and others, is ongoing to mitigate potential risks that Year 2000 poses. In
addition, AMCORE is assessing the readiness of companies that have borrowed from
AMCORE's subsidiaries to insure that incremental Year 2000-related credit risks
are addressed. AMCORE's objective is to try to insure that all aspects of the
Year 2000 issue, including those related to efforts of third parties, will be
fully resolved in time. However, it is not possible to be sure that all aspects
of the Year 2000 issue which may affect AMCORE, including those related to the
effects of customers, suppliers, or other third parties with whom we conduct
business, will not have a material impact on AMCORE's results of operation or
financial condition. AMCORE has consistently maintained contingency plans for
mission critical systems and business processes to protect assets against
unplanned events that would prevent normal operations. The millennium changeover
presents unique risks, some of which may not be effectively addressed by the
existing plans. AMCORE is examining these risks and developing additional plans
to mitigate the effect of potential impacts and insure continuity of operations
throughout the Year 2000 and beyond.
The outsourcing of the core mainframe system to ALLTEL during 1998 addresses the
primary operating systems of AMCORE. The testing of all mission critical systems
was substantially completed as of March 31, 1999. All Year 2000-specific
contingency plans were substantially completed by June 30, 1999 with related
testing to continue throughout the year. At this point, the costs associated
with the Year 2000 issue during 1998 and 1999 are estimated at approximately
$2.3 million, of which $1.3 million is for replacement hardware and software.
These items are not anticipated to have a material impact on future results of
operations. Through June 30, 1999, $2.2 million of the $2.3 million total
estimated costs have been incurred or paid since the inception of the project.
14
<PAGE>
EARNINGS REVIEW BY BUSINESS SEGMENT
AMCORE's internal reporting and planning process has identified three business
segments: Banking, Trust and Asset Management, and Mortgage Banking.
The financial results of each segment are presented as if operated on a
stand-alone basis. There are no comprehensive authorities for management
accounting equivalent to generally accepted accounting principles. Therefore,
the information provided is not necessarily comparable with similar information
from other financial institutions. Additionally, methodologies may change from
time to time as the process is enhanced.
BANKING SEGMENT
The Banking segment provides commercial and personal banking services through
its 66 banking locations in northern Illinois and south-central Wisconsin, and
the Consumer Finance subsidiary. The services provided by this segment include
lending, deposits, cash management, automated teller machines, and other
traditional banking services.
The Banking segment's operating profit for the second quarter of 1999 was $10.4
million before the Restructuring Charge, a decrease of $940,000 from the same
period in 1998. While 1999's second quarter net-interest income increased over
the same period in 1998, it was more than offset by a reduction in non-interest
income, increased loan loss provisions and higher operating expenses.
Net interest income improved by $871,000 net of tax, primarily the result of a
3.4% increase in average earning assets and a 3 basis point improvement in the
interest rate spread. The growth in average earning assets can be attributed to
strong loan growth offset by decreased levels of investment securities related
to the winding down of the investment leveraging program. Average loans
increased $346.5 million or 15.7% when comparing the second quarters of 1999 and
1998. Investment securities decreased $222.2 million on average, or 14.0%
quarter-to-quarter.
Non-interest income decreased by $988,000 net of tax. The decrease is primarily
the result of lower loan and lease sales and less security gains in the second
quarter of 1999 compared to the second quarter of 1998. In addition, 1998
included mortgage revenues related to the pre-aquisition mortgage operations of
the Wisconsin banks. These portfolios have since been integrated into and are
now managed by the Mortgage Segment.
The provision for loan and lease losses increased $305,000 net of tax from the
second quarter of 1999 over the same period in 1998. The increase in provision
relates to the growth in total loans noted above. Operating expenses increased
$351,000 net of tax quarter-to-quarter. In addition to normal increases, the
increase includes costs to upgrade AMCORE's internal network, the development of
an on-line banking product and Year 2000 expenditures previously mentioned.
15
<PAGE>
The Banking segment represented 82.9% and 88.0% of total segment profit before
the Restructuring Charge in the second quarter of 1999 and 1998, respectively.
Year-to-date, the Banking segment represented 83.6% and 88.0% of total segment
profit before the Restructuring Charge in the second quarter of 1999 and the
Merger Charge in the first quarter of 1998.
TRUST AND ASSET MANAGEMENT SEGMENT
The Trust and Asset Management segment provides trust, investment management and
brokerage services. It also acts as an advisor to and provides fund
administration to the Vintage Mutual Funds and offers a complete line of
commercial and individual insurance products. These products are distributed
nationally ( i.e. Vintage Equity Fund is available through Charles Schwab
OneSource(TM)), regionally to institutional investors and corporations, and
locally through AMCORE's 66 banking locations.
The Trust and Asset Management segment's profit increased $656,000 to $1.7
million in the second quarter of 1999. The increase is primarily attributable to
strong sales efforts and favorable investment performance. These increases are
partially offset by the expansion of the trust and asset management staff
resulting from the growth of the segment, which includes a new program to
provide asset management services to high net worth individuals (the "Private
Client Group") and the WCV acquisition previously mentioned.
As of June 30, 1999, trust assets under management total $4.4 billion, including
nearly $1.4 billion related to the Vintage Mutual Fund family.
The Trust and Asset Management segment represented 13.9% and 8.4% of total
segment profit before the Restructuring Charge in the second quarter of 1999 and
1998, respectively. Year-to-date, the Trust and Asset Management segment
represented 11.8% and 8.8% of total segment profit before the Restructuring
Charge in the second quarter of 1999 and the Merger Charge in the first quarter
of 1998.
MORTGAGE BANKING SEGMENT
The Mortgage Banking segment originates residential mortgage loans for sale to
AMCORE'S banking affiliates and the secondary market, and provides servicing of
these mortgage loans.
The Mortgage Banking segment's profit for the second quarter of 1999 was
$400,000, a decrease of $63,000 from the same period a year ago. The decrease
relates mainly to a decline in originations to $70.1 million compared to the
$107.9 million in the second quarter of 1998. The decrease was largely offset by
the previously mentioned transfer of the pre-aquisition related mortgage
operations from the Wisconsin banks to the mortgage segment.
The Mortgage Banking segment represented 3.2% and 3.6% of total segment profit
before the Restructuring Charge in the second quarter of 1999 and 1998,
respectively. Year-to-
16
<PAGE>
date, the Mortgage Banking segment represented 4.6% and 3.3% of total segment
profit before the Restructuring Charge in the second quarter of 1999 and the
Merger Charge in the first quarter of 1998.
CONSOLIDATED 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, 1999 and 1998.
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 presented on the following
table (in thousands):
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30 Ended June 30
--------------------------------------------------------
1999 1998 1999 1998
========================================================
<S> <C> <C> <C> <C>
Interest Income Book Basis $73,902 $74,520 $146,794 $142,835
Taxable Equivalent Adjustment 2,543 2,544 5,054 5,002
--------------------------------------------------------
Interest Income Taxable Equivalent Basis 76,445 77,064 151,848 147,837
Interest Expense 41,240 43,302 82,349 82,664
--------------------------------------------------------
Net Interest Income Taxable Equivalent Basis
$35,205 $33,762 $69,499 $65,173
========================================================
</TABLE>
Net interest income on a fully taxable equivalent basis increased $1.4 million
or 4.3% during the second quarter of 1999 over the same period in 1998. The
improvement in net interest income results mainly from a 3.4% increase in
average earning assets and a 3 basis point improvement in the interest rate
margin.
The growth in average earning assets can be attributed to strong loan growth
offset by decreased levels of investment securities related to the winding down
of the investment leveraging program. Average loans increased $346.5 million or
15.7% when comparing the second quarters of 1999 and 1998. Investment securities
decreased $222.2 million on average, or 14.0% quarter-to-quarter.
The net interest spread is the difference between the average rates on
interest-earning
17
<PAGE>
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 stockholders' equity, 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 increased 7 basis points
to 2.93% in the second quarter of 1999 when compared to the 2.86% during the
same period in 1998. The net interest margin was 3.53% during the second quarter
of 1999, an increase of 3 basis points from the comparable period in 1998.
<TABLE>
<CAPTION>
Quarter Ended Quarter Ended
June 30, 1999 June 30, 1998
---------------------------------- ------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
---------------------------------- ------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest-Earning Assets:
Taxable securities $ 1,012,840 $15,894 6.28% $1,242,204 $20,678 6.66%
Tax-exempt securities (1) 348,253 6,665 7.66% 341,110 6,858 8.04%
---------------------------------- ------------------------------
Total Securities (2) 1,361,093 22,559 6.63% 1,583,314 27,536 6.96%
Loans held for sale (3) 19,449 321 6.60% 27,996 396 5.66%
Loans (1) (4) 2,556,142 53,147 8.27% 2,209,607 48,738 8.78%
Other earning assets 23,538 243 4.08% 9,429 143 6.00%
Fees on mortgage loans held for sale (3) - 175 - - 251 -
---------------------------------- ------------------------------
Total Interest-Earning Assets $ 3,960,222 $76,445 7.69% $3,830,346 $77,064 8.02%
Noninterest-Earning Assets:
Cash and due from banks 103,508 92,277
Other assets 164,440 151,942
Allowance for loan and lease losses (27,670) (24,271)
-------------- ------------
Total Assets $ 4,200,500 $4,050,294
============== ============
Liabilities and Stockholders' Equity
Interest-Bearing Liabilities:
Interest-bearing demand and savings deposits $ 957,802 $6,651 2.82% $ 854,220 $6,645 3.15%
Time deposits 1,594,335 21,846 5.56% 1,544,482 22,740 5.97%
---------------------------------- ------------------------------
Total interest-bearing deposits 2,552,137 28,497 4.48% 2,398,702 29,385 4.91%
Short-term borrowings 615,877 8,125 5.23% 688,135 9,867 5.68%
Long-term borrowings 297,421 4,618 6.23% 267,211 4,050 6.08%
---------------------------------- ------------------------------
Total Interest-Bearing Liabilities $ 3,465,435 $41,240 4.76% $3,354,048 $43,302 5.16%
Noninterest-Bearing Liabilities:
Demand deposits 366,461 325,461
Other liabilities 54,688 53,529
-------------- ------------
Total Liabilities $ 3,886,584 $3,733,038
Stockholders' Equity 313,916 317,256
-------------- ------------
Total Liabilities and
Stockholders' Equity $ 4,200,500 $4,050,294
============== ============
Net Interest Income $35,205 $33,762
========= ==========
Net Interest Spread 2.93% 2.86%
=========== ========
Interest Rate Margin 3.53% 3.50%
========== ========
</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 balances of the investments are based on amortized
historical cost.
(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.
18
<PAGE>
As the table below indicates, the net interest spread for the first six months
of 1999 was flat at 2.88%, when compared to the same period in 1998. The net
interest margin decreased 3 basis points to 3.49% for the first six months of
1999 when compared to the 3.52% during the same period in 1998.
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended
June 30, 1999 June 30, 1998
----------------------------------- ----------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
----------------------------------- ----------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest-Earning Assets:
Tax securities $1,040,783 $32,263 6.20% $ 1,203,739 $40,811 6.78%
Tax-exempt securities (1) 343,387 13,285 7.74% 333,767 13,486 8.08%
----------------------------------- ----------------------------------
Total Securities (2) 1,384,170 45,548 6.58% 1,537,506 54,297 7.07%
Loans held for sale (3) 25,705 743 5.78% 28,272 936 6.62%
Loans (1)(4) 2,519,854 104,778 8.30% 2,091,246 91,865 8.77%
Other earning assets 20,301 402 3.94% 9,817 277 5.61%
Fees on mortgage loans held for sale (3) - 377 - - 462 -
----------------------------------- ---------------------------------------------
Total Interest-Earning Assets $3,950,030 $151,848 7.68% $ 3,666,841 $147,837 8.06%
Noninterest-Earning Assets:
Cash and due from banks 101,426 93,799
Other assets 161,392 147,097
Allowance for loan and lease losses (27,418) (22,558)
------------ ---------------
Total Assets $4,185,430 $ 3,885,179
============ ===============
Liabilities and Stockholders' Equity
Interest-Bearing Liabilities:
Interest-bearing demand and savings deposits $ 955,381 $13,147 1.72% $ 809,336 $12,344 1.94%
Time deposits 1,591,700 43,924 3.33% 1,501,075 44,141 3.41%
----------------------------------- ----------------------------------
Total interest-bearing deposits 2,547,081 57,071 4.52% 2,310,411 56,485 4.93%
Short-term borrowings 598,628 15,809 5.26% 660,690 18,959 5.71%
Long-term borrowings 307,769 9,469 6.20% 236,024 7,220 6.17%
----------------------------------- ----------------------------------
Total Interest-Bearing Liabilities $3,453,478 $82,349 4.80% $ 3,207,125 $82,664 5.18%
Noninterest-Bearing Liabilities:
Demand deposits 359,514 320,882
Other liabilities 55,873 52,704
------------ ---------------
Total Liabilities $3,868,865 $ 3,580,711
316,565 304,468
------------ ---------------
Stockholders' Equity
Total Liabilities and
Stockholders' Equity $4,185,430 $ 3,885,179
============ ===============
Net Interest Income $69,499 $65,173
=========== ===========
Net Interest Spread 2.88% 2.88%
============ ========
Interest Rate Margin 3.49% 3.52%
============ ========
</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 balances of the investments are based on amortized
historical cost.
(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.
19
<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 for
the second quarter of 1999 compared to the second quarter of 1998.
<TABLE>
<CAPTION>
For Three Months Ended
June 30, 1999 / June 30, 1998
(in thousands)
-------------------------------------------------------
Increase (Decrease) Due to Change in Total Net
Average Volume Average Rate Increase
-------------------------------------------------------
<S> <C> <C> <C>
Interest Income:
Taxable Securities $(3,642) $(1,142) $(4,784)
Tax-Exempt Securities (1) 142 (335) (193)
-------------------------------------------------------
Total Securities (2) (3,729) (1,248) (4,977)
Mortgage Loans Held for Sale (134) 59 (75)
Loans (1) (4) (2,855) 4,409
7,264
Other Earning Assets 158 (58) 100
Fees on Mortgage Loans Held for Sale (3) 4 (80) (76)
-------------------------------------------------------
Total Interest-Earning Assets $2,584 $(3,203) $(619)
-------------------------------------------------------
Interest Expense:
Interest-Bearing Demand & Savings Deposits $1,098 $(1,092) $6
Time Deposits 696 (1,590) (894)
-------------------------------------------------------
Total Interest-Bearing Deposits 1,835 (2,723) (888)
Short-Term Borrowings (990) (752) (1,742)
Long-Term Borrowings 467 101 568
-------------------------------------------------------
Total Interest-Bearing Liabilities $1,312 $(3,374) $(2,062)
-------------------------------------------------------
Net Interest Margin / Net Interest Income (FTE) $1,272 $171 $1,443
=======================================================
</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 of the investments are based on amortized historical
cost.
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 increase in net interest income, when comparing the second quarter of 1999
to the second quarter of 1998, is mainly due to a favorable change in average
volume. Average loans increased 15.7% while average investment securities
decreased 14.0%. The net
20
<PAGE>
effect was a 3.4% increase in earning assets. This increase was partially offset
by a 3.3% increase in average interest-bearing liabilities needed to fund the
growth in earning assets.
There was also a small increase in net interest income due to changes in average
interest rates. While the yield on interest-earning assets decreased 33 basis
points, this was more than offset by a 40 basis point decrease on total average
interest-bearing liabilities. The decreased funding costs were the result of a
shift from higher cost borrowings to lower cost deposits, coupled with lower
average interest rates on deposits. The decreased reliance on higher cost
borrowings is the result of the winding down of the leverage program, while the
lower rates on deposits is the result of overall market conditions and declining
interest rates when comparing the second quarter of 1999 with the second quarter
of 1998.
The table below presents an analysis of the changes in net interest income for
the first six months of 1999 compared to the first six months of 1998.
<TABLE>
<CAPTION>
For Six Months Ended
June 30, 1999 / June 30, 1998
(in thousands)
---------------------------------------------------------------
Increase (Decrease) Due to Change in Total Net
Average Volume Average Rate Increase (Decrease)
---------------------------------------------------------------
<S> <C> <C> <C>
Interest Income:
Taxable Securities $(5,195) $(3,353) $(8,548)
Tax-Exempt Securities (1) 382 (583) (201)
---------------------------------------------------------------
Total Securities (2) (5,197) (3,552) (8,749)
Mortgage Loans Held for Sale (80) (113) (193)
Loans (1) (4) 17,856 (4,943) 12,913
Other Earning Assets 227 (102) 125
Fees on Mortgage Loans Held for Sale (3) 7 (92) (85)
---------------------------------------------------------------
Total Interest-Earning Assets $11,139 $(7,128) $4,011
---------------------------------------------------------------
Interest Expense:
Interest-Bearing Demand & Savings Deposits $2,610 $(1,807) $803
Time Deposits 2,541 (2,758) (217)
---------------------------------------------------------------
Total Interest-Bearing Deposits 5,596 (5,010) 586
Short-Term Borrowings (1,706) (1,444) (3,150)
Long-Term Borrowings 2,208 41 2,249
---------------------------------------------------------------
Total Interest-Bearing Liabilities $6,098 $(6,413) $(315)
---------------------------------------------------------------
Net Interest Margin / Net Interest Income (FTE) $5,041 $(715) $4,326
===============================================================
</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 of the investments are based on amortized historical
cost.
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.
21
<PAGE>
The increase in net interest income, when comparing the first six months of 1999
to the first six months of 1998, is due to a favorable change in average volume.
Average loans increased 20.5% while average investment securities decreased
10.0%. The net effect was a 7.7% increase in earning assets. This increase was
partially offset by a 7.7% increase in average interest-bearing liabilities
needed to fund the growth in earning assets.
The volume increase was partially offset by a decrease in net interest income
due to changes in average interest rates. The yield on both interest-earning
assets and interest-bearing liabilities decreased 38 basis points. Both
decreases are the result of overall market conditions and declining interest
rates when comparing the first six months of 1999 with the first six months of
1998.
PROVISION FOR LOAN AND LEASE LOSSES
Management determines an appropriate provision for loan losses based upon its
regular evaluation of individual loans and groups of loans, historical loss
experience, and the size and nature of the loan portfolios. Other factors
include the current economic and industry environment, concentration
characteristics of the loan portfolio and the composition and underlying
collateral of problem loans.
The provision for loan and lease losses was $2.2 million during the second
quarter of 1999 an increase of $509,000 or 31.0% from the same period in 1998.
The increase in provision relates to a growth in total loans and a higher level
of charge-offs.
Annualized net charge-offs to average loans were 0.38% in the second quarter of
1999 versus 0.14% in 1998. The increase is primarily related to the partial
charge-off in the amount of $1.2 million of an agricultural credit in the second
quarter of 1999.
The provision for loan losses for the first six months of 1999 was $4.4 million,
an increase of $590,000 or 15.6% from the same period in 1998. The increase in
provision relates to a growth in total loans and a higher level of charge-offs.
The allowance for loan losses as a percent of total loans was 1.07%, 1.09% and
1.08% at June 30, 1999 and 1998 and December 31, 1998, respectively.
NON-INTEREST INCOME
Total non-interest income was $15.1 million in the second quarter of 1999, an
increase of $1.2 million or 8.5% from the same period in 1998. On a year-to-date
basis, the increase in non-interest income is $2.0 million or 7.4%.
Trust and asset management income increased 28.6% or $1.7 million to total $7.7
million for the second quarter of 1999 versus the same period in 1998. The
increase is primarily
22
<PAGE>
attributable to strong sales efforts and favorable investment performance. Total
managed assets, which includes fee-based accounts and Vintage Fund balances,
rose 2.5% during the quarter and at June 30, 1999 stands at $4.4 billion.
Service charges on deposits increased $223,000 or 10.2% from the second quarter
of 1998 to $2.4 million for the second quarter of 1999.
Mortgage revenues declined $480,000 or 19.7% from the second quarter of 1998 to
$2.0 million for the second quarter of 1999. The decrease relates mainly to a
decline in originations to $70.1 million compared to the $107.9 million in the
second quarter of 1998.
OPERATING EXPENSES
Operating expense totaled $36.5 million during the second quarter of 1999, an
increase of $8.6 million or 30.6% from the same period in 1998. The second
quarter of 1999 included a $6.1 million pre-tax Restructuring Charge previously
mentioned. Excluding the Restructuring Charge, operating expenses increased $2.5
million or 8.8%. This increase is primarily related to increased compensation,
equipment and data processing expenses.
Excluding the Restructuring Charge, the efficiency ratio for the second quarter
of 1999 was 60.5% compared to 58.6% for the second quarter of 1998. The increase
was the result of core operating expenses increasing 8.8% while revenues
increased 5.8%. Year-to-date, excluding the Restructuring Charge in the second
quarter of 1999 and the Merger Charge in the first quarter of 1998, the
efficiency ratio increased to 60.8% from 60.2%. The increase was the result of
core operating expenses increasing 8.0% while revenues increased 7.2%.
Excluding $2.2 million in severance and other personnel costs included in the
Restructuring Charge, salaries and wages increased $988,000 or 7.7% when
comparing the second quarter of 1999 with the same period in 1998. The increase
relates primarily to annual merit increases and the expansion of the trust and
asset management segment associated with the formation of the Private Client
Group and the WCV acquisition previously mentioned.
Equipment expense was $2.5 million in the second quarter of 1999 and represents
an increase of $485,000 or 24.5% from the same period in 1998. Excluding $1.3
million of systems integration costs included in the Restructuring Charge, data
processing expense increased $1.1 million when comparing the second quarter of
1999 with the same period in 1998. These increases primarily relate to the
upgrade of AMCORE's internal LAN-based reporting systems, the development of an
on-line banking product, outsourcing the core mainframe system to ALLTEL
including post-conversion programming and Year 2000 expenditures previously
mentioned.
Professional fees increased $1.6 million quarter-to-quarter. The increase
primarily relates to legal and consulting expenses included in the Restructuring
Charge.
23
<PAGE>
Other operating expenses increased $844,000 quarter-to-quarter. The increase
relates to outplacement, customer communications and other miscellaneous costs
included in the Restructuring Charge.
INCOME TAXES
Income tax expense for the second quarter of 1999 decreased $2.3 million from
the second quarter of 1998 to $2.0 million. The decrease is primarily the tax
benefit associated with the Restructuring Charge. The second quarter of 1999
effective tax rate of 28.3%, after adjusting for the Restructuring Charge,
compares to a 27.7% effective tax rate for the same period in 1998. This
increase in effective tax rate is largely the result of higher state income
taxes.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
A comprehensive qualitative and quantitative analysis regarding market risk was
disclosed in the Company's December 31, 1998 Form 10K. There have been no
material changes in the assumptions used or results obtained regarding market
risk.
BALANCE SHEET REVIEW
Total assets were $4.2 billion at June 30, 1999, an increase of $60.5 million or
1.5% from December 31, 1998. Total earning assets increased $77.3 million from
December 31, 1998. This increase was funded by a $100.8 million increase in
borrowings, which also offset a $23.1 million decrease in deposits.
ASSET QUALITY REVIEW
ALLOWANCE FOR LOAN AND LEASE LOSSES
The allowance for loan and lease losses was $27.6 million at June 30,1999, an
increase of $1.2 million from December 31, 1998. The allowance represented 1.07%
of total loans and 154.5% of non-performing loans at June 30, 1999. The
comparable ratios were 1.08% and 145.2% at December 31, 1998.
Net charge-offs were $2.4 million during the second quarter of 1999 versus
$800,000 for the same quarter of 1998. For the six months ended June 30, 1999
and 1998 net charge-offs were $3.2 million and $1.3 million, respectively. The
increase of $1.6 million for the second quarter and $1.9 million for the six
month period relate primarily to the partial charge-off in the amount of $1.2
million of an agricultural credit in the second quarter of 1999. The remaining
balance of the agricultural credit is classifed as non-performing.
24
<PAGE>
An analysis of the allowance for loan and lease losses as of June 30, 1999 and
1998 is presented below:
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30 Ended June 30
-----------------------------------------------------------
1999 1998 1999 1998
===========================================================
<S> <C> <C> <C> <C>
Balance at beginning of period $27,919 $23,745 $26,403 $19,908
Charge-Offs:
Commercial loans & leases 1,508 173 1,706 333
Real estate loans 166 181 283 198
Installment loans 1,099 555 1,797 1,196
Credit card loans 111 149 212 240
-----------------------------------------------------------
2,884 1,058 3,998 1,967
Recoveries:
Commercial loans & leases 165 75 238 324
Real estate loans 38 17 48 27
Installment loans 234 143 531 323
Credit card loans 13 24 37 40
-----------------------------------------------------------
450 259 854 714
Net Charge-Offs 2,434 799 3,144 1,253
Provision charged to expense 2,151 1,642 4,377 3,787
Allowance for loan and lease losses
acquired through merger - - - 2,146
-----------------------------------------------------------
Balance at end of period $27,636 $24,588 $27,636 $24,588
===========================================================
Ratio of net charge-offs during the period
to average loans outstanding during the
period (1) 0.38% 0.14% 0.25% 0.12%
===========================================================
</TABLE>
(1) On an annualized basis
25
<PAGE>
NON-PERFORMING ASSETS
Non-performing assets increased $478,000 or 2.3% from December 31, 1998 to $21.0
million at June 30, 1999. Non-performing assets as of June 30, 1999 and December
31, 1998 are presented below.
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
-----------------------------
<S> <C> <C>
Impaired Loans:
Non-accrual loans and leases
Commercial......................................... $12,355 $11,139
Real Estate........................................ 1,253 1,963
Other non-performing
Non-accrual loans(1)............................... 4,280 5,077
-----------------------------
Total non-performing loans and leases.............. $17,888 $18,179
Foreclosed real estate................................... 3,090 2,321
-----------------------------
Total non-performing assets......................... $20,978 $20,500
=============================
Loans 90 days or more past due and still accruing........ $7,042 $7,272
</TABLE>
(1) These loans are not considered impaired since they are part of a small
balance homogeneous portfolio.
CAPITAL MANAGEMENT
Total stockholders' equity was $299.5 million at June 30, 1999, a decrease of
$16.6 million from December 31, 1998. The book value per share of AMCORE common
stock was $10.96 at December 31, 1998. AMCORE paid a dividend of $.14 per share
during the second quarter of 1999.
On October 21, 1998, AMCORE announced a stock repurchase program for up to five
percent of its common stock or 1.4 million shares. The repurchased shares will
become treasury shares and will be used for general corporate purposes,
including the issuance of shares in connection with AMCORE's stock option and
other employee benefit plans. Through June 30, 1999, 1.2 million shares have
been purchased at an average price of $23.32 per share.
26
<PAGE>
AMCORE's bank subsidiaries are considered "well capitalized" based on regulatory
guidelines. AMCORE's leverage ratio was 8.05% at June 30, 1999. AMCORE's ratio
of Tier I capital at 11.88% and total risk based capital of 12.85% significantly
exceed the regulatory minimums as indicated in the table below.
<TABLE>
<CAPTION>
June 30, 1999 June 30, 1998
------------- -------------
Amount Ratio Amount Ratio
============================================================
<S> <C> <C> <C> <C>
Tier 1 Capital $336,893 11.88% $333,689 13.12%
Tier 1 Capital Minimum 113,442 4.00% 101,755 4.00%
------------------------------------------------------------
Amount in Excess of Minimum $223,451 7.88% $231,934 9.12%
------------------------------------------------------------
Total Capital $364,530 12.85% $358,277 14.08%
Total Capital Minimum 226,884 8.00% 203,510 8.00%
------------------------------------------------------------
Amount in Excess of Minimum $137,646 4.85% $154,767 6.08%
------------------------------------------------------------
Risk Adjusted Assets $2,836,048 $2,543,870
============== ===============
</TABLE>
27
<PAGE>
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, 1999 (File
No. 0-13393).
ITEM 6. Exhibits and Reports on Form 10-Q
(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 Transitional Compensation Agreement dated May 1, 1999 between
AMCORE Financial, Inc. and the following individuals: Gregory
Sprawka and Bruce W. Lammers.
22 1999 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, 1998).
27 Financial Data Schedule
99 Additional exhibits - Press release dated July 6, 1999
- Press release dated July 20, 1999
28
<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 13, 1999
/s/ John R. Hecht
------------------------------------------
John R. Hecht
Executive Vice President and Chief
Financial Officer (Duly authorized officer
of the registrant and principal financial
officer)
29
Exhibit 10.1
TRANSITIONAL COMPENSATION AGREEMENT
-----------------------------------
AGREEMENT by and between Amcore Financial, Inc., a Nevada corporation
(the "Company"), and BRUCE W. LAMMERS AND GREGORY SPRAWKA (the "Executive"),
dated as of the 1st day of May, 1999. 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 May 1, 2000; provided,
however, that on May 1, 2000, 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 give notice to the Executive that the
2
<PAGE>
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 securities
of the Company entitled to vote generally in the election of directors, as the
case may be; or
3
<PAGE>
(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 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
4
<PAGE>
(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.)
(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
5
<PAGE>
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 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;
6
<PAGE>
(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 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.
7
<PAGE>
(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:
(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
8
<PAGE>
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 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
9
<PAGE>
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 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
10
<PAGE>
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.
(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
11
<PAGE>
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 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
12
<PAGE>
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.
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
13
<PAGE>
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
(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
14
<PAGE>
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, 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
15
<PAGE>
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 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
16
<PAGE>
(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 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:
--------------------
Bruce W. Lammers Gregory Sprawka
4N456 Old Quarry Road 4945 Pine Meadow
St. Charles, IL 61074 Rockford, IL 61111
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.
17
<PAGE>
(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.
(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.
18
<PAGE>
AMCORE FINANCIAL, INC.
By:
--------------------------------
James S. Waddell
Its Executive Vice President &
Chief Administrative Officer
--------------------------------
Bruce W. Lammers
("Executive")
--------------------------------
Gregory Sprawka
("Executive")
19
<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
----------------
0-2 3-5 6-10 11-20 21-30 Over 30
--- --- ---- ----- ----- -------
Base Salary
- -----------
$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%
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 120,609
<INT-BEARING-DEPOSITS> 29,877
<FED-FUNDS-SOLD> 2,550
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,285,791
<INVESTMENTS-CARRYING> 14,626
<INVESTMENTS-MARKET> 14,614
<LOANS> 2,609,342
<ALLOWANCE> 27,636
<TOTAL-ASSETS> 4,208,360
<DEPOSITS> 2,924,638
<SHORT-TERM> 631,636
<LIABILITIES-OTHER> 54,806
<LONG-TERM> 297,779
0
0
<COMMON> 6,575
<OTHER-SE> 292,926
<TOTAL-LIABILITIES-AND-EQUITY> 4,208,360
<INTEREST-LOAN> 52,937
<INTEREST-INVEST> 20,226
<INTEREST-OTHER> 739
<INTEREST-TOTAL> 73,902
<INTEREST-DEPOSIT> 28,497
<INTEREST-EXPENSE> 41,240
<INTEREST-INCOME-NET> 32,662
<LOAN-LOSSES> 2,151
<SECURITIES-GAINS> 379
<EXPENSE-OTHER> 36,488
<INCOME-PRETAX> 9,097
<INCOME-PRE-EXTRAORDINARY> 9,097
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,126
<EPS-BASIC> .25
<EPS-DILUTED> .25
<YIELD-ACTUAL> 3.53
<LOANS-NON> 17,888
<LOANS-PAST> 7,042
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 25,842
<ALLOWANCE-OPEN> 27,919
<CHARGE-OFFS> 2,884
<RECOVERIES> 450
<ALLOWANCE-CLOSE> 27,636
<ALLOWANCE-DOMESTIC> 19,845
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 7,791
</TABLE>
Exhibit 99.1
NEWS RELEASE
Date: July 6, 1999
Contact:
For media inquiries:
Katherine Taylor
Investor Relations Manager
815-961-7164
For financial inquiries:
John Hecht
815-961-2787
AMCORE ANNOUNCES COST SAVINGS
EXPECTED FROM NEW ORGANIZATIONAL STRUCTURE
ROCKFORD -- AMCORE Financial, Inc., a $4.2 billion regional financial
services company, announces it expects $7.3 million in annual pre-tax cost
savings from its new "Customer Focused Organizational Structure." The bulk of
the savings will be achieved through the consolidation of its nine banking
charters into one bank.
"Our new structure will enhance our response to local markets, make us more
efficient and increase shareholder value," said Robert J. Meuleman, president
and chief executive officer.
The projected cost savings are expected to meaningfully impact performance
beginning with the first quarter of 2000. The primary savings are expected to
come from reductions in staffing and regulatory costs. We also expect reduced
corporate support expenses due to the simpler structure.
AMCORE announced its "Customer Focused Organizational Structure," in April
and has been undergoing a business process review to identify cost savings. The
next step in the three-phase plan is to begin centralizing or regionalizing
various operational functions. The third and final phase, which is expected to
be completed in the fourth quarter, is to collapse the nine charters into one
bank charter and convert the data processing records into one company.
"I want to stress that implementing and completing our new organizational
structure will be our major focus," said Meuleman. " Our energies are committed
to completing our new structure, which we believe is the best use of our time
and resources at the present."
Although the Company will be operating under one charter, it will not be
eliminating directors or bank presidents. Instead, their responsibilities will
change from a fiduciary role to focus more on business development, corporate
advocacy and community leadership.
"Our directors and local presidents serve a vital role in all of our
communities," said Meuleman. "They are a significant source of business
referrals and local competitive intelligence. We have consulted them throughout
the process and have received valuable input."
<PAGE>
The Company will take a pre-tax charge relating to the organizational
changes of $6.1 million in the second quarter. The largest component of the
charge is required for employee severance, professional fees, and other costs to
integrate systems.
"This moves us in the right direction to becoming a stronger company," said
Meuleman. "By removing inefficient structures and higher costs we will better
serve our customers and our shareholders."
AMCORE Financial, Inc., headquartered in northern Illinois, is a financial
services company with banking assets of $4.2 billion operating in 66 locations
in Illinois and Wisconsin. The company also has four financial services
companies: AMCORE Investment Group, which provides trust and brokerage services,
and through Investors Management Group, provides capital management and mutual
fund administrative services, and is the investment advisor for the Vintage
family of mutual funds; AMCORE Mortgage, Inc.; AMCORE Consumer Finance Company,
Inc. and AMCORE Insurance Group, Inc.
This news release contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995 with respect to the new
organizational structure and results of operations and businesses of AMCORE.
Forward-looking statements may include hopes, beliefs, expectations or
predictions of the future. 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 and retain existing customers;
(IV) inability to carry out marketing and/or expansion plans; (V) loss of key
executives; (VI) changes in interest rates including the effect of prepayment;
(VII) general economic and business conditions which are less favorable than
expected; (VIII) unanticipated changes in industry trends; (IX) changes in
Federal Reserve Board monetary policies; (X) inability to realize cost savings
anticipated with the new organizational structure, mergers or data processing
outsourcing; and (XI) higher than expected costs or other difficulties
associated with merger integration, data processing conversion or Year 2000
compliance solutions, (XII) changes in the final organizational structure.
AMCORE common stock is listed on The NASDAQ Stock Market under the symbol
"AMFI." Further information about AMCORE Financial Inc. can be found at our
website at http://www.AMCORE.com.
Exhibit 99.2
NEWS RELEASE
Date: July 20, 1999
Contact:
For media inquiries:
Katherine Taylor
Investor Relations Manager
815-961-7164
For financial inquiries:
John Hecht
Chief Financial Officer
815-961-2787
AMCORE FINANCIAL, INC., ANNOUNCES SECOND QUARTER EARNINGS
NON-PERFORMING LOANS DOWN 20 PERCENT
ROCKFORD, IL -- AMCORE Financial, Inc., a $4.2 billion regional financial
services company, reported diluted earnings per share from operations of $0.38
for the second quarter ending June 30, 1999.
The earnings per share from operations was flat compared to the same period
a year ago, but reflected an 8.6 percent increase when compared to the first
quarter of this year.
"We're extremely pleased to report a significant improvement in our
non-performing loans, which decreased 20 percent, or $4.5 million from March 31,
1999," said Robert J. Meuleman, president and chief executive officer.
HIGHLIGHTS
----------
o Non-performing loans were down 20 percent or $4.5 million from the first
quarter of 1999.
o Net revenues increased 6 percent or $2.6 million from a year ago.
o Average loans for the second quarter were up 16 percent, or $347 million
from the same period last year due to a strong regional economy, business
expansion and sales management initiatives.
o Total fee revenues were up 10 percent from a year ago.
o Trust and asset management fees rose 29 percent in the second quarter to
$7.7 million primarily driven by favorable investment performance and
strong sales results.
o Net interest margin rose 3 basis points from the second quarter of 1998
and is up 8 basis points from the first quarter of 1999.
-- MORE --
Page 1
<PAGE>
NEW ORGANIZATIONAL STRUCTURE
----------------------------
In April, AMCORE announced its new Customer Focused Organizational plan that
is expected to improve efficiency, enhance responsiveness to local markets and
increase shareholder value. The plan calls for operating as one banking company
and centralizing or regionalizing certain corporate functions. As a result of
the new organizational structure, AMCORE took a $3.8 million after tax charge in
the second quarter. The largest component of the charge is required for employee
severance and costs to integrate systems. AMCORE expects $7.3 million in annual
pre-tax cost savings from its new structure.
Net income, which includes the charge, was $7.1 million for the second
quarter of 1999 compared to $11.2 million in the second quarter of 1998. Diluted
earnings per share, which includes the charge of $0.13 per share, were $0.25 for
the second quarter of 1999.
"We've done a good job of growing revenues and are now focusing on funding
costs and improving operational efficiency to support our sales efforts. Taking
the operational focus out of the local markets will increase the ability of our
people to serve our customers and their communities," said Meuleman. "The new
structure will preserve our super community banking philosophy, while still
offering cost-saving efficiencies achieved by operating under one charter."
EARNINGS FROM OPERATIONS
------------------------
Net income from operations for the second quarter was down slightly at $10.9
million compared to the record $11.2 million reported last year. "While we had
increases in net interest and non-interest income in the second quarter, they
were offset by increased provision for loan losses as a result of loan growth,
higher data processing expenses and investment related expenditures," said
Meuleman. "These expenditures were required for us to continue to grow our
business and to keep pace with changing technology and customer expectations."
Average loans increased 16 percent, or $347 million from the same period a
year ago, and was evenly balanced between commercial and retail lending. Average
earning assets rose 3.4 percent and the net interest margin increased 3 basis
points to 3.53 percent when compared to the second quarter of 1998. These
factors caused a $1.4 million increase in net interest income on a fully taxable
equivalent basis.
-- MORE --
Page 2
<PAGE>
Trust and asset management revenues increased 29 percent to $7.7 million in
the second quarter of 1999 compared to $6 million in the second quarter of 1998.
The increase is primarily driven by strong sales efforts and favorable
investment performance. Total managed assets, which includes fee based accounts
and Vintage Fund balances, rose 11 percent during the quarter and now stands at
$4.4 billion.
Total operating expenses for the second quarter of 1999 increased 8.8
percent to $30.4 million when compared to the second quarter of 1998. The
increase in expenses includes higher data processing costs and investment
related expenditures. "We've expanded our investment group staff to continue to
growth this important fee-based business for the future. We also have been
creating an infrastructure that has the technological capabilities to deliver
our products and services when and where our customers need them most," said
Meuleman. AMCORE upgraded its internal network and out-sourced its data
processing to achieve a standard platform. The Company also has been developing
an on-line banking product which will be rolled-out to customers in the third
quarter.
ASSET QUALITY AND RESERVES
--------------------------
The allowance for loan losses to total loans was 1.07 percent at June 30,
1999, compared to 1.11 percent at March 31, 1999. The allowance for loan losses
to non-performing loans rose to 154 percent at the end of the second quarter, up
from 124 percent at March 31, 1999. Total non-performing loans at June 30, 1999
were $17.9 million compared to $20.8 million, a 14 percent reduction compared to
last year.
Provision for loan losses increased 31 percent or $500,000 during the second
quarter of 1999 compared to the same quarter last year to match the strong loan
growth AMCORE has experienced. Net charge-offs represented 38 basis points
annualized of average loans for the second quarter compared to 14 basis points
annualized last year.
AMCORE Financial, Inc., headquartered in northern Illinois, is a financial
services company with banking assets of $4.2 billion operating in 66 locations
in Illinois and Wisconsin. The company also has four financial services
companies: AMCORE Investment Group, which provides trust and brokerage services,
and through Investors Management Group, provides capital management and mutual
fund administrative services, and is the investment advisor for the Vintage
family of mutual funds; AMCORE Mortgage, Inc.; AMCORE Consumer Finance Company,
Inc. and AMCORE Insurance Group, Inc.
-- MORE --
Page 3
<PAGE>
This news release contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995 with respect to the new
organizational structure and results of operations and businesses of AMCORE.
Forward-looking statements may include hopes, beliefs, expectations or
predictions of the future. 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 and retain existing customers;
(IV) inability to carry out marketing and/or expansion plans; (V) loss of key
executives; (VI) changes in interest rates including the effect of prepayment;
(VII) general economic and business conditions which are less favorable than
expected; (VIII) unanticipated changes in industry trends; (IX) changes in
Federal Reserve Board monetary policies; (X) inability to realize cost savings
anticipated with the new organizational structure, mergers or data processing
outsourcing; and (XI) higher than expected costs or other difficulties
associated with merger integration, data processing conversion or Year 2000
compliance solutions, (XII) changes in the final organizational structure.
AMCORE common stock is listed on The NASDAQ Stock Market under the symbol
"AMFI." Further information about AMCORE Financial Inc. can be found at our
website at http://www.AMCORE.com.
###
Page 4
<PAGE>
AMCORE Financial, Inc.
CONSOLIDATED KEY FINANCIAL DATA SUMMARY
NOTE: AMCORE Financial, Inc. (AFI) acquired Investors Management Group, Ltd. on
February 17, 1998, which was accounted for as a purchase. AFI merged
with Midwest Federal Financial Corp. on March 27, 1998. This transaction
was accounted for as a pooling of interests, however, the size of the
transaction does not require restatement of prior year amounts. AFI
acquired Wellmark Capital Value, Inc. on March 31, 1999, which was
accounted for as a purchase.
(in thousands, except share data)
<TABLE>
<CAPTION>
Quarter Ended June 30, Six Months Ended June 30,
----------------------------------------------------------------
Percent Percent
Financial Highlights 1999 1998 Change 1999 1998 Change
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net revenues, including security gains..... $ 47,736 $ 45,116 5.8% $ 93,281 $ 87,008 7.2%
Net interest income - FTE.................. 35,205 33,762 4.3% 69,499 65,173 6.6%
Operating expenses......................... 30,392 27,932 8.8% 59,750 55,341 8.0%
Net income from operations................. 10,893 11,236 (3.1%) 20,929 20,642 1.4%
Net income................................. 7,126 11,236 (36.6%) 17,162 17,335 (1.0%)
Basic earnings per share from operations... 0.39 0.39 0.0% 0.74 0.74 0.0%
Basic earnings per share................... 0.25 0.39 (35.9%) 0.61 0.62 (1.6%)
Diluted earnings per share from operations. 0.38 0.38 0.0% 0.73 0.72 1.4%
Diluted earnings per share................. 0.25 0.38 (34.2%) 0.60 0.61 (1.6%)
Cash dividends per share................... 0.14 0.14 0.0% 0.28 0.26 7.7%
Book value per share....................... 10.59 10.94 (3.2%)
Trailing Twelve Months Ended
June 30,
--------------------------------
Percent
Financial Highlights 1999 1998 Change
- -----------------------------------------------------------------------------
Net revenues, including security gains..... $ 187,755 $ 169,283 10.9%
Net interest income - FTE.................. 137,092 126,378 8.5%
Operating expenses......................... 119,506 110,601 8.1%
Net income from operations................. 43,175 39,035 10.6%
Net income................................. 39,408 35,728 10.3%
Basic earnings per share from operations... 1.50 1.43 4.9%
Basic earnings per share................... 1.37 1.31 4.6%
Diluted earnings per share from operations. 1.49 1.39 7.2%
Diluted earnings per share................. 1.36 1.28 6.2%
Cash dividends per share................... 0.56 0.50 12.0%
Book value per share.......................
Quarter Ended June 30, Six Months Ended June 30,
------------------------------------------------------------------
Key Financial Ratios (A) 1999 1998 Change 1999 1998 Change
- --------------------------------------------------------------------------------------------------------------
Return on average assets................ 1.04% 1.11% (0.07%) 1.01% 1.07% (0.06%)
Return on average equity................ 13.92% 14.21% (0.29%) 13.33% 13.67% (0.34%)
Net interest margin (FTE)............... 3.53% 3.50% 0.03% 3.49% 3.52% (0.03%)
Efficiency Ratio (FTE).................. 60.45% 58.61% 1.84% 60.76% 60.15% 0.61%
</TABLE>
(A) All ratios have been adjusted to exclude merger-related and restructuring
charges.
<TABLE>
<CAPTION>
Quarter Ended June 30, Six Months Ended June 30,
------------------------------------------------------------------
Percent Percent
Income Statement 1999 1998 Change 1999 1998 Change
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest income............................ $ 73,902 $ 74,520 (0.8%) $ 146,794 $ 142,835 2.8%
Interest expense........................... 41,240 43,302 (4.8%) 82,349 82,664 (0.4%)
------------------------------------------------------------------
Net interest income..................... 32,662 31,218 4.6% 64,445 60,171 7.1%
Provision for loan losses.................. 2,151 1,642 31.0% 4,377 3,787 15.6%
Non-interest income:
Trust and asset management income....... 7,709 5,993 28.6% 14,296 11,254 27.0%
Service charges on deposits............. 2,408 2,185 10.2% 4,626 4,049 14.3%
Mortgage revenues....................... 1,957 2,437 (19.7%) 4,095 5,075 (19.3%)
Other................................... 2,621 2,742 (4.4%) 5,247 5,376 (2.4%)
------------------------------------------------------------------
Total non-interest income............ 14,695 13,357 10.0% 28,264 25,754 9.7%
Net security gains......................... 379 541 (29.9%) 572 1,083 (47.2%)
Operating expenses:
Personnel costs......................... 17,140 16,106 6.4% 33,865 31,776 6.6%
Net occupancy expense................... 1,622 1,644 (1.3%) 3,351 3,357 (0.2%)
Equipment expense....................... 2,463 1,978 24.5% 4,568 3,799 20.2%
External data processing expense........ 1,492 441 238.3% 3,093 739 318.5%
Professional fees....................... 866 740 17.0% 1,997 1,635 22.1%
Advertising and business development.... 1,017 912 11.5% 1,763 1,678 5.1%
Amortization of intangible assets....... 498 685 (27.3%) 995 1,271 (21.7%)
Other................................... 5,294 5,426 (2.4%) 10,118 11,086 (8.7%)
------------------------------------------------------------------
Total operating expenses............. 30,392 27,932 8.8% 59,750 55,341 8.0%
------------------------------------------------------------------
Income before income taxes................. 15,193 15,542 (2.2%) 29,154 27,880 4.6%
Income taxes............................... 4,300 4,306 (0.1%) 8,225 7,238 13.6%
------------------------------------------------------------------
Net income from operations................. $ 10,893 $ 11,236 (3.05%) $ 20,929 $ 20,642 1.4%
Restructuring/merger related charges,
net of tax ............................ 3,767 - N/M 3,767 3,307 13.9%
------------------------------------------------------------------
Net income................................. $ 7,126 $ 11,236 (36.6%) $ 17,162 $ 17,335 (1.0%)
==================================================================
Average shares outstanding - basic (000)... 28,252 29,047 (2.7%) 28,363 28,078 1.0%
Average shares outstanding - diluted (000). 28,659 29,635 (3.3%) 28,800 28,608 0.7%
Ending shares outstanding (000)............ 28,289 29,050 (2.6%)
</TABLE>
<PAGE>
AMCORE Financial, Inc.
<TABLE>
<CAPTION>
Quarter Ended June 30,
---------------------------------------------------------
(in thousands) 1999 1998
- ---------------------------------------------------------------------------------------------------
Ending Average Yield/ Average Yield/
Balance Balance Rate Balance Rate
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets:
Taxable securities.................... $ 958,954 $1,012,840 6.28% $ 1,242,204 6.66%
Tax-exempt securities (FTE)........... 341,463 348,253 7.66% 341,110 8.04%
Other earning assets.................. 32,427 23,538 4.08% 9,429 6.00%
Loans held for sale................... 18,687 19,449 6.60% 27,996 5.66%
Loans, net of unearned income (FTE)... 2,590,655 2,556,142 8.27% 2,209,607 8.78%
---------------------------------------------------------
Total Earning Assets (FTE)......... $3,942,186 $3,960,222 7.69% $ 3,830,346 8.02%
Intangible assets.................. 18,099 18,328 19,061
Other non-earning assets........... 248,075 221,950 200,887
---------------------------------------------------------
Total Assets....................... $4,208,360 $4,200,500 $ 4,050,294
=========================================================
Liabilities and Stockholders' Equity:
Interest bearing deposits............. $2,529,099 $2,552,137 4.48% $ 2,398,702 4.91%
Non-interest bearing deposits......... 395,539 366,461 325,461
---------------------------------------------------------
Total Deposits..................... $2,924,638 $2,918,598 $ 2,724,163
---------------------------------------------------------
Short-term borrowings................. 631,636 615,877 5.23% 688,135 5.68%
Long-term borrowings.................. 297,779 297,421 6.23% 267,211 6.08%
---------------------------------------------------------
Total Interest Bearing Liabilities. 3,458,514 3,465,435 4.76% 3,354,048 5.16%
Other liabilities.................. 54,806 54,688 53,529
---------------------------------------------------------
Total Liabilities.................. $3,908,859 $3,886,584 $ 3,733,038
Stockholders' Equity............... 299,501 313,916 317,256
---------------------------------------------------------
Total Liabilities and
Stockholders' Equity............... $4,208,360 $4,200,500 $ 4,050,294
=========================================================
Six Months Ended June 30,
-----------------------------------------
(in thousands) 1999 1998
- -----------------------------------------------------------------------------------
Average Yield/ Average Yield/
Balance Rate Balance Rate
- -----------------------------------------------------------------------------------
Assets:
Taxable securities.................... $1,040,783 6.20% $1,203,739 6.78%
Tax-exempt securities (FTE)........... 343,387 7.74% 333,767 8.08%
Other earning assets.................. 20,301 3.94% 9,817 5.61%
Loans held for sale................... 25,705 5.78% 28,272 6.62%
Loans, net of unearned income (FTE)... 2,519,854 8.30% 2,091,246 8.77%
-----------------------------------------
Total Earning Assets (FTE)......... $3,950,030 7.68% $3,666,841 8.06%
Intangible assets.................. 18,540 17,174
Other non-earning assets........... 216,860 201,164
-----------------------------------------
Total Assets....................... $4,185,430 $3,885,179
=========================================
Liabilities and Stockholders' Equity:
Interest bearing deposits............. $2,547,081 4.52% $2,310,411 4.93%
Non-interest bearing deposits......... 359,514 320,882
-----------------------------------------
Total Deposits..................... $2,906,595 $2,631,293
-----------------------------------------
Short-term borrowings................. 598,628 5.26% 660,690 5.71%
Long-term borrowings.................. 307,769 6.20% 236,024 6.17%
-----------------------------------------
Total Interest Bearing Liabilities. 3,453,478 4.80% 3,207,125 5.18%
Other liabilities.................. 55,873 52,704
-----------------------------------------
Total Liabilities.................. $3,868,865 $3,580,711
Stockholders' Equity............... 316,565 304,468
-----------------------------------------
Total Liabilities and
Stockholders' Equity............... $4,185,430 $3,885,179
=========================================
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
Quarter Ended Six Months Ended June 30,
---------------------------------------------------------------------------------
June 30, Percent December 31, Percent Percent
Asset Quality (in thousands) 1999 1998 Change 1998 Change 1999 1998 Change
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C <C> <C> <C>
Ending allowance for loan losses......... $ 27,636 $ 24,588 12.4% $ 26,403 4.7%
Net charge-offs.......................... 2,434 800 204.3% 1,513 60.9% 3,144 1,254 150.7%
Net charge-offs to average loans (B)..... 0.38% 0.14% 0.2% 0.25% 0.1% 0.25% 0.12% 0.1%
Non-performing assets:
Non-performing loans - nonaccrual..... $ 17,888 $ 20,825 (14.1%) $ 18,179 (1.6%)
Other real estate owned (OREO)........ 3,090 1,880 64.4% 2,321 33.1%
------------------------------------------------------
Total non-performing assets........ $ 20,978 $ 22,705 (7.6%) $ 20,500 2.3%
======================================================
Loans 90 days past due and still accruing $ 7,042 $ 5,751 22.4% $ 7,272 (3.2%)
</TABLE>
(B) On an annualized basis.
<TABLE>
<CAPTION>
Key Asset Quality Ratios Change Change
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance to ending loans............... 1.07% 1.09% (0.02%) 1.08% (0.01%)
Allowance to non-performing loans....... 154.49% 118.07% 36.42% 145.24% 9.25%
Non-performing loans to loans........... 0.69% 0.92% (0.23%) 0.74% (0.05%)
Non-performing assets to loans & OREO... 0.81% 1.01% (0.20%) 0.84% (0.03%)
Non-performing assets to total assets... 0.50% 0.55% (0.05%) 0.50% 0.00%
Capital Adequacy
- --------------------------------------------------------------------------------------------
Total risk-based capital................. 12.85% 14.08% (1.23%) 13.46% (0.61%)
Tier 1 risk-based capital................ 11.88% 13.12% (1.24%) 12.49% (0.61%)
Leverage ratio........................... 8.05% 8.28% (0.23%) 8.31% (0.26%)
</TABLE>
