UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
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 April 30, 2000 was 27,102,343 shares.
Index of Exhibits on Page 26
<PAGE>
AMCORE FINANCIAL, INC.
Form 10-Q Table of Contents
PART I Page Number
- ------ -----------
Item 1 Financial Statements
Consolidated Balance Sheets as of March 31, 2000 and
December 31, 1999 3
Consolidated Statements of Income for the Three Months
Ended March 31, 2000 and 1999 4
Consolidated Statements of Stockholders' Equity for the Three Months
Ended March 31, 2000 and 1999 5
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 2000 and 1999 6
Notes to Consolidated Financial Statements 7
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations 14
Item 3 Quantitative and Qualitative Disclosures About Market Risk 25
PART II
- -------
Item 1 Legal Proceedings 26
Item 4 Submission of Matters to a Vote of Security Holders 26
Item 6 Exhibits and Reports on Form 10-Q 26
Signatures 28
<PAGE>
PART I. ITEM 1: Financial Statements
AMCORE Financial, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
=================================================================================================================================
(in thousands, except share data)
<S> <C> <C>
Assets Cash and cash equivalents...................................................... $112,686 $179,113
Interest earning deposits in banks............................................. 8,998 6,039
Federal funds sold and other short-term investments............................ 200 -
Loans and Leases held for sale................................................. 15,983 13,974
Securities available for sale.................................................. 1,263,313 1,227,396
Securities held to maturity (fair value of $ 12,097 in 2000; $ 13,818 in 1999). 12,294 13,977
----------------------------------
Total securities .......................................................... $1,275,607 $1,241,373
Loans and leases, net of unearned income....................................... 2,784,216 2,746,613
Allowance for loan and lease losses............................................ (29,166) (28,377)
----------------------------------
Net loans and leases....................................................... $2,755,050 $2,718,236
Premises and equipment, net ................................................... 55,393 55,618
Intangible assets, net......................................................... 18,175 17,102
Foreclosed real estate......................................................... 2,137 2,675
Other assets................................................................... 125,410 113,491
----------------------------------
TOTAL ASSETS............................................................... $4,369,639 $4,347,621
==================================
Liabilities LIABILITIES
And Deposits:
Stockholders' Demand deposits.............................................................. $1,254,302 $1,202,632
Equity Savings deposits............................................................. 148,917 145,795
Other time deposits.......................................................... 1,741,072 1,667,981
----------------------------------
Total deposits............................................................ $3,144,291 $3,016,408
Short-term borrowings.......................................................... 549,965 699,398
Long-term borrowings .......................................................... 337,325 285,270
Other liabilities.............................................................. 55,110 52,817
----------------------------------
TOTAL LIABILITIES......................................................... $4,086,691 $4,053,893
----------------------------------
STOCKHOLDERS' EQUITY
Preferred stock, $1 par value: authorized 10,000,000 shares; none issued...... $ - $ -
Common stock, $.22 par value: authorized 45,000,000 shares;
March 31, December 31,
2000 1999
---- ----
Issued 29,661,076 29,648,571
Outstanding 27,112,663 27,949,431 6,587 6,585
Additional paid-in capital..................................................... 74,806 74,244
Retained earnings ............................................................. 278,458 271,781
Deferred compensation non-employee directors................................... (1,501) (1,533)
Treasury stock ................................................................ (47,661) (30,442)
Accumulated other comprehensive loss........................................... (27,741) (26,907)
----------------------------------
TOTAL STOCKHOLDERS' EQUITY................................................ $282,948 $293,728
----------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................................ $4,369,639 $4,347,621
==================================
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
<PAGE>
AMCORE Financial, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
2000 1999
===============================================================================================================================
(in thousands, except per share data)
<S> <C> <C>
Interest Interest and fees on loans and leases................................... $57,074 $51,437
Income Interest on securities:
Taxable............................................................... 17,503 16,369
Tax-exempt............................................................ 3,796 4,303
-------------------------------
Total Income from Securities....................................... $21,299 $20,672
-------------------------------
Interest on federal funds sold and other short-term investments......... $31 $53
Interest and fees on loans and leases held for sale..................... 292 624
Interest on deposits in banks........................................... 236 106
-------------------------------
Total Interest Income.............................................. $78,932 $72,892
-------------------------------
Interest Interest on deposits.................................................... $32,401 $28,574
Expense Interest on short-term borrowings....................................... 9,216 7,684
Interest on long-term borrowings........................................ 4,353 4,851
-------------------------------
Total Interest Expense............................................. $45,970 $41,109
-------------------------------
Net Interest Income................................................ $32,962 $31,783
Provision for loan and lease losses..................................... 2,390 2,226
-------------------------------
Net Interest Income After Provision for Loan and Lease Losses...... $30,572 $29,557
-------------------------------
Non-Interest Trust and asset management income....................................... $7,622 $6,587
Income Service charges on deposits............................................. 2,614 2,218
Mortgage revenues....................................................... 941 2,584
Other................................................................... 2,857 2,626
-------------------------------
Non-Interest Income, Excluding Net Realized Security Gains ........ $14,034 $14,015
Net realized security gains ............................................ 703 193
-------------------------------
Total Non-Interest Income.......................................... $14,737 $14,208
Operating Compensation expense.................................................... $12,924 $12,985
Expenses Employee benefits....................................................... 3,289 3,740
Net occupancy expense................................................... 1,837 1,729
Equipment expense....................................................... 2,283 2,105
Data processing expense................................................. 1,592 1,601
Professional fees....................................................... 1,008 1,131
Advertising and business development.................................... 983 746
Amortization of intangible assets....................................... 528 497
Other................................................................... 5,226 5,270
-------------------------------
Total Operating Expenses........................................... $29,670 $29,804
-------------------------------
Income Before Income Taxes.............................................. $15,639 $13,961
Income taxes............................................................ 4,552 3,925
-------------------------------
NET INCOME......................................................... $11,087 $10,036
===============================
BASIC EARNINGS PER COMMON SHARE......................................... $ 0.40 $ 0.35
DILUTED EARNINGS PER COMMON SHARE....................................... 0.40 0.35
DIVIDENDS PER COMMON SHARE.............................................. 0.16 0.14
AVERAGE COMMON SHARES OUTSTANDING....................................... 27,477 28,475
AVERAGE DILUTED SHARES OUTSTANDING...................................... 27,832 28,924
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
<PAGE>
AMCORE Financial, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Deferred
Additional Compensation
Common Paid-in Retained Non-Employee Treasury
Stock Capital Earnings Directors Stock
----------------------------------------------------
(in thousands, except share data)
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1998................................................. $ 6,572 $ 75,260 $ 247,486 $ (1,706) $ (8,263)
----------------------------------------------------
Comprehensive Income:
Net Income................................................................. - - 10,036 - -
Unrealized holding losses on securities available for sale arising
during the period...................................................... - - - - -
Less reclassification adjustment for realized gains included in net income - - - - -
Income tax expense related to items of other comprehensive income........... - - - - -
----------------------------------------------------
Net unrealized gains (losses) on securities available for sale.............. - - - - -
----------------------------------------------------
Comprehensive Income......................................................... - - 10,036 - -
----------------------------------------------------
Cash dividends on common stock-$.14 per share.............................. - - (3,951) - -
Purchase of shares for the treasury........................................ - - - - (16,282)
Reissuance of treasury shares for Non-Employee
Directors stock plan..................................................... - (7) - (325) 332
Deferred compensation expense.............................................. - - - 136 -
Reissuance of treasury shares for employee incentive plans................. - (205) - - 1,780
----------------------------------------------------
----------------------------------------------------
Balance at March 31, 1999.................................................... $ 6,572 $ 75,048 $ 253,571 $ (1,895) $ (22,433)
----------------------------------------------------
----------------------------------------------------
Balance at December 31, 1999 $ 6,585 $ 74,244 $ 271,781 $ (1,533) $ (30,442)
----------------------------------------------------
Comprehensive Income:
Net Income................................................................. - - 11,087 - -
Unrealized holding losses on securities available for sale arising
during the period...................................................... - - - - -
Less reclassification adjustment for realized gains included in net income - - - - -
Income tax expense related to items of other comprehensive income........... - - - - -
----------------------------------------------------
Net unrealized gains (losses) on securities available for sale.............. - - - - -
----------------------------------------------------
Comprehensive Income......................................................... - - 11,087 - -
----------------------------------------------------
Cash dividends on common stock-$.16 per share.............................. - - (4,410) - -
Purchase of shares for the treasury........................................ - - - (19,903)
Issuance of common shares for employee stock plan.......................... 2 187 - - -
Reissuance of treasury shares for Non-Employee
Directors stock plan..................................................... - (3) - (87) 90
Deferred compensation expense.............................................. - - - 119 -
Reissuance of treasury shares for employee incentive plans................. - 378 - - 2,594
----------------------------------------------------
Balance at March 31, 2000.................................................... $ 6,587 $ 74,806 $ 278,458 $ (1,501) $ (47,661)
----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Accumulated
Other Total
Comprehensive Stockholders'
Income (Loss) Equity
---------------------------
<S> <C> <C>
Balance at December 31, 1998................................................. $ (3,266) $ 316,083
---------------------------
Comprehensive Income:
Net Income................................................................. - 10,036
Unrealized holding losses on securities available for sale arising
during the period...................................................... 4,766 4,766
Less reclassification adjustment for realized gains included in net income (193) (193)
Income tax expense related to items of other comprehensive income........... 77 77
---------------------------
Net unrealized gains (losses) on securities available for sale.............. 4,650 4,650
---------------------------
Comprehensive Income......................................................... 4,650 14,686
---------------------------
Cash dividends on common stock-$.14 per share.............................. - (3,951)
Purchase of shares for the treasury........................................ - (16,282)
Reissuance of treasury shares for Non-Employee
Directors stock plan..................................................... - -
Deferred compensation expense.............................................. - 136
Reissuance of treasury shares for employee incentive plans................. - 1,575
---------------------------
Balance at March 31, 1999.................................................... $ 1,384 $ 312,247
---------------------------
---------------------------
Balance at December 31, 1999 $ (26,907) $ 293,728
---------------------------
Comprehensive Income:
Net Income................................................................. - 11,087
Unrealized holding losses on securities available for sale arising
during the period...................................................... (412) (412)
Less reclassification adjustment for realized gains included in net income (703) (703)
Income tax expense related to items of other comprehensive income........... 281 281
---------------------------
Net unrealized gains (losses) on securities available for sale.............. (834) (834)
---------------------------
Comprehensive Income......................................................... (834) 10,253
---------------------------
Cash dividends on common stock-$.16 per share.............................. - (4,410)
Purchase of shares for the treasury........................................ - (19,903)
Issuance of common shares for employee stock plan.......................... - 189
Reissuance of treasury shares for Non-Employee
Directors stock plan..................................................... - -
Deferred compensation expense.............................................. - 119
Reissuance of treasury shares for employee incentive plans................. - 2,972
---------------------------
Balance at March 31, 2000.................................................... $ (27,741) $ 282,948
---------------------------
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
<PAGE>
AMCORE Financial, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
(in thousands) 2000 1999
========================================================================================================================
<S> <C> <C>
Cash Flows Net income.......................................................... $ 11,087 $ 10,036
From Adjustments to reconcile net income to net
Operating cash provided by operating activities:
Activities Depreciation and amortization of premises and equipment........ 1,791 1,765
Amortization and accretion of securities, net.................. 696 3,189
Provision for loan and lease losses............................ 2,390 2,226
Amortization of intangible assets.............................. 528 497
Net gain on sale of securities available for sale.............. (703) (193)
Deferred income taxes.......................................... 2 407
Originations of loans held for sale............................ (40,278) (96,517)
Proceeds from sales of loans held for sale..................... 38,269 117,067
Other, net..................................................... 9,479 (4,399)
-----------------------------------
Net cash (used for) provided by operating activities........ $ 23,261 $ 34,078
-----------------------------------
Cash Flows Proceeds from maturities of securities available for sale........... $ 42,804 $ 122,212
From Proceeds from maturities of securities held to maturity............. 1,683 1,281
Investing Proceeds from sales of securities available for sale................ 25,319 38,238
Activities Purchase of securities available for sale........................... (105,459) (200,227)
Net (increase) decrease in federal funds sold
and other short-term investments................................. (200) 9,427
Net increase in interest earning deposits in banks.................. (2,959) (5,773)
Loans and leases made to customers
and principal collection of loans and leases, net................ (39,661) (70,434)
Premises and equipment expenditures, net............................ (1,577) (916)
Investment in company owned life insurance.......................... (20,000) 0
Proceeds from the sale of other real estate......................... 1,025 370
-----------------------------------
Net cash used for investing activities...................... $ (99,025) $ (104,610)
-----------------------------------
Cash Flows Net increase (decrease) in demand deposits and savings accounts..... $ 54,792 ($19,867)
From Net increase (decrease) in time deposits............................ 73,091 (1,606)
Financing Net (decrease) increase in short-term borrowings.................... (149,433) 82,447
Activities Proceeds from long-term borrowings.................................. 65,000 -
Payment of long-term borrowings..................................... (12,961) (461)
Dividends paid...................................................... (4,410) (3,951)
Issuance of common stock for employee incentive plans............... 189 -
Issuance of treasury stock for employee benefit incentive plans..... 2,972 1,575
Purchase of treasury stock.......................................... (19,903) (16,282)
-----------------------------------
Net cash provided by financing activities................... $ 9,337 $ 41,855
-----------------------------------
Net change in cash and cash
equivalents......................................................... $ (66,427) $ (28,677)
Cash and cash equivalents:
Beginning of year................................................. 179,113 144,199
-----------------------------------
End of period..................................................... $ 112,686 $ 115,522
===================================
Supplemental Cash payments for:
Disclosures of Interest paid to depositors....................................... $ 31,676 $ 30,959
Cash Flow Interest paid on borrowings....................................... 13,402 12,326
Information Income taxes paid................................................. 60 166
Non-Cash Foreclosed real estate - acquired in settlement of loans............ 533 520
Investing and Transfer of long-term borrowings to short-term borrowings........... - 33,650
Financing
Activities
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
<PAGE>
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.
Operating results for the three month period ended March 31, 2000 are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 2000. 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, 1999.
New Accounting Standards
The FASB issued FAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities", in 1998, which establishes accounting and reporting standards for
derivative instruments and for hedging activities. It requires an entity to
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. FAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133 - an amendment of FASB Statement No.
133" was issued in 1999, which delayed implementation of FAS No. 133.
Implementation of FAS No. 133 will be effective for all fiscal years beginning
after June 15, 2000. The Company has not yet determined when it will implement
the Statement nor has it completed the complex analysis required to determine
the impact on the financial statements.
NOTE 2 - EARNINGS PER SHARE
<TABLE>
<CAPTION>
For the Three Months
Earnings per share calculations are as follows: Ended March 31,
2000 1999
---------------------------------
(in thousands, except per share data)
<S> <C> <C>
Net Income $ 11,087 $ 10,036
Basic earnings per share:
Weighted average shares outstanding 27,477 28,475
Shares related to IMG earned not issued 36 19
---------------------------------
Average basic shares outstanding 27,513 28,494
---------------------------------
Earnings per share $ 0.40 $ 0.35
---------------------------------
Diluted earnings per share:
Weighted average shares outstanding 27,477 28,475
Net effect of the assumed purchase of stock under the
stock option and stock purchase plans - based on
the treasury stock method using average market price 229 379
Shares related to IMG earned not issued 36 19
Contingently issuable shares under IMG purchase agreement 90 51
---------------------------------
Average diluted shares outstanding 27,832 28,924
---------------------------------
Diluted Earnings per share $ 0.40 $ 0.35
---------------------------------
</TABLE>
<PAGE>
NOTE 3 - SECURITIES
A summary of securities at March 31, 2000 and December 31, 1999 were as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
At March 31, 2000
Securities Available for Sale:
U.S. Treasury $ 59,649 $ 55 $ (358) $ 59,346
U.S. Government agencies 41,800 9 (1,179) 40,630
Agency mortgage-backed securities 784,184 511 (33,486) 751,209
State and political subdivisions 301,181 1,469 (9,402) 293,248
Corporate obligations and other 122,213 19 (3,352) 118,880
------------------------------------------------------------------
Total Securities Available for Sale $ 1,309,027 $ 2,063 $ (47,777) $ 1,263,313
------------------------------------------------------------------
Securities Held to Maturity:
U.S. Treasury $ 802 $ - $ (10) $ 792
U.S. Government agencies 25 - - 25
State and political subdivisions 11,467 41 (228) 11,280
Corporate obligations and other - - - -
------------------------------------------------------------------
Total Securities Held to Maturity $ 12,294 $ 41 $ (238) $ 12,097
------------------------------------------------------------------
Total Securities $ 1,321,321 $ 2,104 $ (48,015) $ 1,275,410
==================================================================
At December 31, 1999
Securities Available for Sale:
U.S. Treasury $ 61,466 $ 171 $ (258) $ 61,379
U.S. Government agencies 32,390 3 (847) 31,546
Agency mortgage-backed securities 746,953 1,308 (31,951) 716,310
State and political subdivisions 299,304 1,254 (11,055) 289,503
Corporate obligations and other 131,572 85 (2,999) 128,658
------------------------------------------------------------------
Total Securities Available for Sale $ 1,271,685 $ 2,821 $ (47,110) $ 1,227,396
------------------------------------------------------------------
Securities Held to Maturity:
U.S. Treasury $ 1,053 $ - $ (8) $ 1,045
U.S. Government agencies 25 - - 25
State and political subdivisions 12,898 53 (204) 12,747
Corporate obligations and other 1 - - 1
------------------------------------------------------------------
Total Securities Held to Maturity $ 13,977 $ 53 $ (212) $ 13,818
------------------------------------------------------------------
Total Securities $ 1,285,662 $ 2,874 $ (47,322) $ 1,241,214
==================================================================
</TABLE>
Realized gross gains resulting from the sale of securities available for sale
were $703,000 and $306,000 for the three months ended March 31, 2000 and 1999,
respectively. Realized gross losses were $0 and $113,000 for the three months
ended March 31, 2000 and 1999, respectively. At March 31, 2000 and 1999,
securities with a fair value of $937.8 million and $882.6 million, respectively,
were pledged to secure public deposits, securities under agreements to
repurchase and for other purposes required by law.
<PAGE>
NOTE 4 - LOANS AND LEASES
The composition of the loan and lease portfolio at March 31, 2000 and December
31, 1999, was as follows:
March 31, December 31,
2000 1999
-------------------------------
(in thousands)
Commercial, financial and agricultural.......... $706,386 $710,302
Real estate-construction........................ 131,532 121,216
Real estate-commercial.......................... 738,670 732,447
Real estate-residential......................... 703,067 689,702
Installment and consumer........................ 501,077 489,586
Direct lease financing.......................... 3,607 3,489
------------------------------
Gross loans and leases..................... $2,784,339 $2,746,742
Unearned income............................ (123) (129)
------------------------------
Loans and leases, net of unearned
income..................................... $2,784,216 $2,746,613
Allowance for loan and lease
losses..................................... (29,166) (28,377)
------------------------------
NET LOANS AND LEASES....................... $2,755,050 $2,718,236
==============================
NOTE 5 - Short-Term Borrowings
Short-term borrowings consisted of the following:
March 31, December 31,
2000 1999
-------------------------------
(in thousands)
Securities sold under agreements to repurchase.. $476,725 $456,227
Federal Home Loan Bank borrowings............... 51,829 114,479
Federal funds purchased......................... 10,540 118,000
U.S. Treasury tax and loan note accounts........ 4,286 10,692
Commercial paper borrowings..................... 6,585 -
------------------------------
Total Short-Term Borrowings.................. $549,965 $699,398
==============================
<PAGE>
NOTE 6 - Long-Term Borrowings
Long-term borrowings consisted of the following:
March 31, December 31,
2000 1999
-------------------------------
(in thousands)
Federal Home Loan Bank borrowings.............. $ 296,501 $ 244,018
Capital Trust preferred securities............. 40,000 40,000
Other long-term borrowings..................... 824 1,252
------------------------------
Total Long-Term Borrowings........ $ 337,325 $ 285,270
==============================
AMCORE Bank, N.A., periodically borrows additional funds from the Federal Home
Loan Bank (FHLB) in connection with the purchase of mortgage-backed securities.
Certain Federal Home Loan Bank borrowings have prepayment penalties and call
features associated with them. The current balance of the long-term borrowings
was $297.0 million with an average maturity of 5.77 years, and a weighted
average borrowing rate of 5.59%.
Repayments of FHLB borrowings based upon call features, assuming they are called
at the earliest call date, are as follows at March 31, 2000:
Total
----------------
(in thousands)
2000.................................................... $ 98,500
2001.................................................... 150,000
2002.................................................... 15,000
2003.................................................... 4,000
----------------
Total callable FHLB borrowings.................. $267,500
================
On March 25, 1997, the Company issued $40.0 million of capital securities
through AMCORE Capital Trust I ("Trust"), a statutory business trust. All of the
common securities of the Trust are owned by the Company. The capital securities
pay cumulative cash distributions semiannually at an annual rate of 9.35%. The
securities are redeemable from March 25, 2007 until March 25, 2017 at a
declining rate of 104.6750% to 100% of the principal amount. After March 25,
2017, they are redeemable at par until June 15, 2027 when redemption is
mandatory. Prior redemption is permitted under certain circumstances such as
changes in tax or regulatory capital rules. The proceeds of the capital
securities were invested by the Trust in junior subordinated debentures which
represents all of the assets of the Trust. The Company fully and unconditionally
guarantees the capital securities through the combined operation of the
debentures and other related documents. The Company's obligations under the
guarantee are unsecured and subordinate to senior and subordinated indebtedness
of the company.
Other long-term borrowings include a non-interest bearing note requiring annual
payments of $444,000 through 2002. The note was recorded at its present value
using a discount rate of 8.0%.
Repayments of long-term borrowings based upon scheduled maturity dates are as
follows at March 31, 2000:
Total
----------------
(in thousands)
2000.................................................... $ 73
2001.................................................... 1,972
2002.................................................... 31,285
2003.................................................... 50,092
2004.................................................... 65,057
Thereafter.............................................. 188,846
----------------
Total Long-term Borrowings...................... $337,325
================
<PAGE>
NOTE 7-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 65 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. 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 65 banking locations. The Mortgage Banking segment originates
residential mortgage loans for sale to AMCORE's banking affiliate and the
secondary market, 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.
BUSINESS SEGMENTS
<TABLE>
<CAPTION>
Trust and Asset Mortgage Total
For the three months ended March 31, 2000 Banking Management Banking Segments
-----------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Net interest income $ 32,788 $ 92 $ 432 $ 33,312
Provision for loan and lease losses 2,390 - - 2,390
Non-interest income 6,495 8,196 1,620 16,311
Operating expenses 22,052 5,744 1,634 29,430
Income taxes 4,100 1,099 162 5,361
-----------------------------------------------------------
Segment profit $ 10,741 $ 1,445 $ 256 $ 12,442
===========================================================
Segment assets $ 4,332,696 $ 21,567 $ 25,566 $ 4,379,829
===========================================================
For the three months ended March 31, 1999
Net interest income $ 31,566 $ 53 $ 659 $ 32,278
Provision for loan and lease losses 2,226 - - 2,226
Non-interest income 5,237 7,165 3,076 15,478
Operating expenses 21,752 5,274 2,590 29,616
Income taxes 3,228 854 458 4,540
-----------------------------------------------------------
Segment profit $ 9,597 $ 1,090 $ 687 $ 11,374
===========================================================
Segment assets $ 4,242,620 $ 17,173 $ 34,816 $ 4,294,609
===========================================================
</TABLE>
<PAGE>
NOTE 7 - SEGMENTS (continued)
Reconcilement of Segment Information to Financial Statements
<TABLE>
<CAPTION>
For the three months ended March 31,
Net interest income and non-interest income 2000 1999
- ------------------------------------------- ----------------------------------------
(in thousands)
<S> <C> <C>
Total for segments $ 49,623 $ 47,756
Unallocated revenues:
Holding company (1,595) 6,099
Other 30 16
Elimination of intersegment revenues (359) (7,880)
----------------------------------------
Consolidated total revenues $ 47,699 $ 45,991
========================================
Profit
- ------
Total for segments $ 12,442 $ 11,374
Unallocated loss:
Holding company (1,288) (1,059)
Other (27) (163)
Elimination of intersegment gain/(loss) (40) (116)
----------------------------------------
Consolidated net income $ 11,087 $ 10,036
========================================
Assets
- ------
Total for segments $ 4,379,829 $ 4,294,609
Unallocated assets:
Holding company 32,077 42,656
Other 43,475 43,569
Elimination of intersegment assets (85,742) (180,692)
----------------------------------------
Consolidated assets $ 4,369,639 $ 4,200,142
========================================
</TABLE>
<PAGE>
NOTE 8 - RESTRUCTURING CHARGE
The components of the 1999 restructuring charge and the activity during
the first quarter of 2000 were as follows:
<TABLE>
<CAPTION>
12/31/99 First Quarter 3/31/00
Balance Cash Payments Balance
---------------- ----------------- ---------------
<S> <C> <C> <C>
Compensation expense . . . . . . . . (1) $972 ($511) $461
Employee benefits . . . . . . . . . . (2) 83 (18) 65
Data processing expense . . . . . . . (3) 459 (220) 239
Professional fees . . . . . . . . . . (4) 290 (71) 219
Other . . . . . . . . . . . . . . . . (5) 75 (2) 73
---------------- ----------------- ---------------
Charge before income taxes . . . . . 1,879 (822) 1,057
Income taxes . . . . . . . . . . . . 747 (327) 420
---------------- ----------------- ---------------
Charge after income taxes . . . . . . $1,132 ($495) $637
================ ================= ===============
</TABLE>
- ----------------
(1) Staff reductions totaling 187 employees are planned. Through March 31,
2000, 74 employees had been terminated and paid severance benefits. An
additional 86 employees had transferred to other open positions due to
attrition, or had voluntarily left the Company prior to the time severance
benefits became payable. As of March 31, 2000, 27 employees remained to be
severed.
(2) Social security and medicare taxes on severance and incentives.
(3) Amounts represent costs to convert data processing records of nine
separate banks into one.
(4) Amounts represent legal fees for regulatory filings and advice as well as
consulting fees for process review, systems redesign and implementation.
(5) Amounts include outplacement services for terminated employees;
replacement of forms, checks and supplies; and customer notifications.
NOTE 9 - CONTINGENCIES
Management believes that no litigation is threatened or pending in which
AMCORE faces potential loss or exposure which will materially affect
AMCORE's financial position or results of operations, other than noted
below. Since AMCORE's subsidiaries act as depositories of funds, trustee and
escrow agents, they are named as defendants in lawsuits involving claims to
the ownership of funds in particular accounts. This and other litigation is
incidental to AMCORE's business.
On August 26, 1999, Willie Parker and five other plaintiffs filed a civil
action in the Circuit Court of Humphreys County, Mississippi against AMCORE
Consumer Finance Company, Inc., a subsidiary of AMCORE, and other defendants
containing twelve separate counts related to the sale and financing of
residential satellite dish systems. Though the actual purchase price for
each of these systems involves a principal amount of less than $3,000, the
complaint prays for economic loss and compensatory damages in the amount of
$5 million for each plaintiff and punitive damages in the amount of $100
million for each plaintiff. AMCORE has denied the plaintiffs' allegations
and has removed the case to the United States District Court for the
Northern District of Mississippi. The proceedings are currently stayed
pending resolution of the plaintiffs' motion to remand the case to the state
court. Although at this early date the ultimate disposition of the case
cannot be predicted with certainty, based on information currently
available, AMCORE believes that the plaintiffs' damage claims are
disproportionate and that the final outcome of the case will not have a
materially adverse effect on AMCORE's consolidated financial condition,
though it could have a materially adverse affect on AMCORE's consolidated
results of operations in a given year. AMCORE has not recorded an accrual
for payment of the damages in this case because, in management's opinion, an
unfavorable outcome in this litigation is not probable.
<PAGE>
ITEM 2. 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 March 31, 2000 as compared to December 31, 1999 and the results of
operations for the three months ended March 31, 2000 as compared to the same
period in 1999. This discussion is intended to be read in conjunction with the
consolidated financial statements and notes thereto appearing elsewhere in this
report.
This report contains certain forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995 with respect to the
financial condition, results of operations, plans, objectives, future
performance and business of AMCORE. Statements that are not historical facts,
including statements about beliefs and expectations, are forward-looking
statements. These statements are based upon beliefs and assumptions of AMCORE'S
management and on information currently available to such management. The use of
the words "believe", "expect", "anticipate", "plan", "estimate", "may", "will"
or similar expressions are forward looking statements. Forward-looking
statements speak only as of the date they are made, and AMCORE undertakes no
obligation to update publicly any of them in light of new information or future
events.
Contemplated, projected, forecasted or estimated results in such forward-looking
statements involve certain inherent risks and uncertainties. A number of factors
- - many of which are beyond the ability of the company to control or predict -
could cause actual results to differ materially from those in its
forward-looking statements. These factors 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 or personnel; (VI) changes in
interest rates including the effect of prepayment; (VII) general economic and
business conditions which are less favorable than expected; (VIII) equity and
fixed income market fluctuations; (IX) unanticipated changes in industry trends;
(X) unanticipated changes in credit quality and risk factors; (XI) success in
gaining regulatory approvals when required; (XII) changes in Federal Reserve
Board monetary policies; (XIII) inability to fully realize cost savings from the
new organizational structure within the expected time frame or additional or
unexpected costs are incurred; (XIV) unexpected outcomes on existing or new
litigation in which AMCORE, its subsidiaries, officers, directors or employees
are named defendants; (XV) higher than expected costs or other difficulties
associated with Year 2000 compliance solutions; (XVI) technological changes;
(XVII) changes in Generally Accepted Accounting Principles: and (XVIII)
inability of third-party vendors to perform critical services to the company.
OVERVIEW OF OPERATIONS
AMCORE's net income for the three months ended March 31, 2000 was $11.1 million,
an increase of $1.1 million from the $10.0 million reported in the 1999
comparable period. Diluted earnings per share were $0.40 for the three months
ended March 31, 2000, an increase of $0.05 from the $0.35 reported in the 1999
comparable period. AMCORE's annualized return on average equity was 15.63% for
the first quarter of 2000 compared to 12.75% recorded in the first quarter of
1999. The first quarter return on average assets was 1.03% in 2000 versus 0.98%
in 1999.
The primary factor contributing to the improved operating earnings was a $1.2
million increase in net interest income over the first quarter of 1999. The
increase was driven by continued strong loan growth, up 11.1% on average from
the first quarter of 1999. Trust and asset management revenues, service charges
on deposits and other non-interest income were up $1.0 million, $396,000 and
$231,000, respectively, over the first quarter of 1999 and offset a $1.6 million
decline in mortgage revenues over the same period. Mortgage revenues declined as
increased interest rates from a year ago resulted in lower refinancing activity
and a $446,000 mortgage servicing impairment reversal in the first quarter of
1999. Security gains were up $510,000 from the first quarter of 1999. Operating
expenses were down $134,000 from the first quarter of 1999 as a result of cost
savings from
<PAGE>
AMCORE's new Customer Focused Organizational Structure combined with reduced
mortgage segment expenses associated with the decline in refinancing activity.
Both AMCORE and the bank subsidiary (the "BANK") continue to exceed the minimum
capital requirements established by regulators for banks and bank holding
companies.
YEAR 2000
AMCORE has not experienced any significant disruptions to its existing or
continuing financial and operating activities caused by a failure of its
application software programs, operating systems or other systems to accommodate
the date value for the year 2000 ("Year 2000"). The Company has no information
that would indicate that any material borrower has experienced significant Year
2000 issues that would materially impact their ability to service their loan or
otherwise fulfill their borrowing agreement's terms and/or covenants. In
addition, AMCORE is not aware of any situation indicating that a significant
vendor or service provider may be unable to sell goods or provide services to
the company as the result of a Year 2000 issue.
It is not possible, however, to be sure that all aspects of the Year 2000 issue
that may affect AMCORE, including those related to the effects of customers,
suppliers, or other third parties with whom we conduct business, are fully known
or that they will not have a material impact on AMCORE's results of operation or
financial condition. AMCORE will take appropriate actions if any Year 2000
systems failure should occur. These actions include contingency plans that the
Company has consistently maintained for mission critical systems and business
processes to protect assets against unplanned events that would prevent normal
operations. These plans have been modified to address the unique risks of the
millennium changeover in order to mitigate the effect of potential impacts and
insure continuity of operations throughout the Year 2000 and beyond.
The costs associated with the Year 2000 issue during 1998, 1999 and 2000 were
estimated at approximately $2.6 million, of which $1.3 million was for
replacement hardware and software. These costs do not include an estimated
$359,000 and $147,000 in foregone net interest income in the fourth quarter of
1999 and the first quarter of 2000, respectively, associated with increased cash
reserves that were intentionally carried in anticipation of the potential for
Year 2000 related withdrawals by depositors anxious about the millennium
changeover. These items are not anticipated to have a material impact on future
results of operations. Through March 31, 2000, $2.5 million of the $2.6 million
total estimated costs had been incurred or paid since the inception of the
project, including $35,000 in the first quarter of 2000. The remainder of the
costs is not expected to be incurred, barring some unforeseen Year 2000 related
event.
1999 Restructuring Charge
In the second quarter 1999, AMCORE announced a new "Customer Focused
Organizational Structure" (the "CFOS"). Events giving rise to the announcement
was a recognition by AMCORE that its corporate structure of nine separate
banking charters was perpetuating operational inefficiencies, staffing
redundancies and burdensome regulatory reporting requirements. The new CFOS is
expected to improve efficiency, enhance responsiveness to local markets and
increase shareholder value. It will increase the ability of market presidents,
directors and salespeople to focus on serving customers and their communities by
centralizing or regionalizing certain support functions.
To accomplish the new CFOS, AMCORE merged its nine banks into one charter as
AMCORE Bank, N.A. (the "BANK"). The centralization of retail operations and
corporate support functions, including the conversion of data processing records
into one bank ("Phase 1") was substantially completed by the end of the fourth
quarter of 1999. Minor centralization and conversion issues not yet completed
are expected to be completed and paid by the end of the second quarter in 2000.
During the fourth quarter of 1999, in continuation of the CFOS restructuring
initiative, AMCORE adopted plans to centralize its commercial loan operations
and to streamline the Trust and Asset Management segment operations ("Phase 2").
AMCORE expects to complete this phase of its CFOS restructuring by the end of
2000.
<PAGE>
AMCORE's pre-tax charges (the "Restructuring Charge") related to the CFOS
restructuring totaled $6.1 million for Phase 1 and $537,000 for Phase 2 in the
second and fourth quarters of 1999, respectively. The major components of the
Restructuring Charge included employee severance and benefits, systems and
integration costs, legal and professional fees and other related expenses.
Excess Restructuring Charges of $1.4 million pre-tax, related to Phase 1 were
reversed during the fourth quarter of 1999. The reversal related to lower than
expected severance and benefits due to unplanned employee attrition in positions
unaffected by the CFOS restructuring that permitted the retention of some
employees whose positions were otherwise being eliminated and by some affected
employees leaving for positions outside the company before their severance
became payable. In addition, systems and integration costs were completed at a
lower cost than expected.
The amount of the Restructuring Charge relating to CFOS restructuring activities
not yet completed, or that otherwise remains unpaid, is $1.1 million pre-tax as
of March 31, 2000. Of this amount, $561,000 and $496,000 relate to Phase 1 and
Phase 2, respectively. See Note 8 to the Notes to Consolidated Financial
Statements for a tabular presentation of the Restructuring Charge by major
component.
AMCORE expects $7.3 million in annual pre-tax savings from its new CFOS. The
primary savings are expected to come from reductions in staffing and regulatory
costs. Altogether, staff reductions of 187 employees are planned. Through March
31, 2000, 74 employees had been terminated and paid severance benefits. An
additional 86 employees had transferred to other open positions due to
attrition, or had voluntarily left the Company prior to the time severance
benefits became payable. As of March 31, 2000, 27 employees remained to be
severed. Reduced corporate support expenses are also expected due to the simpler
structure. The savings will be reflected on the income statement through reduced
compensation expense, employee benefits and professional fees. A majority of the
projected cost savings, on a quarterly basis, have been realized in the first
quarter of 2000.
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. Note 7 to
the Notes to Consolidated Financial Statements presents a condensed income
statement for each segment.
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.
Banking Segment
The banking segment provides commercial and personal banking services through
its 65 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 first quarter of 2000 was $10.7
million, an increase of $1.1 million or 11.9% from the same period in 1999. The
2000 increase in banking segment operating profit is the result of net interest
income and non-interest income increasing 3.9% and 24.0%, respectively, while
operating expenses increased only 1.4%.
The increase in net interest margin was driven by strong loan growth, while
increased security gains and higher service charges on deposits were the primary
factors contributing to the higher non-interest income. Cost savings from
AMCORE's new CFOS were nearly sufficient to offset normal merit increases,
cost-of-living adjustments and year-to-year inflation increases, holding the
increase in operating expenses to $300,000 over the first quarter of 1999. These
factors combined to reduce the segment's efficiency ratio to 52.71%, a 244 basis
point improvement from 55.15% for the first quarter of 1999.
<PAGE>
The banking segment represented 86.3% and 84.4% of total segment profit in the
first quarter of 2000 and 1999, respectively.
Trust and Asset Management Segment
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 Funds. 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 banking locations.
The Trust and Asset Management segment's profit increased $355,000 or 32.6% to
$1.4 million in the first quarter of 2000. Revenues increased $1.1 million or
14.8% from the first quarter of 1999. The increase was attributable to continued
growth of the segment, favorable investment performance and expansion into
recordkeeping and administrative services for tax-qualified retirement plans
following the March 31, 1999 acquisition of Wellmark Capital Value, Inc ("WCV").
These increases were partially offset by lower insurance commission income
resulting from the sale of AMCORE's insurance agency business on August 27,
1999. Operating expenses were up $470,000 or 8.9% from the first quarter of
1999. The increase was primarily attributable to increased personnel costs
associated with the growth of the business, normal merit and cost-of-living
increases and the acquisition of WCV. These increases were partially offset by
the elimination of expenses associated with the operation of the insurance
agency business.
As of March 31, 2000, trust assets under management totaled $4.4 billion,
including $1.5 billion in the Vintage Mutual Fund family. Total assets under
administration, which include managed and custodial assets, totaled $5.2
billion.
The Trust and Asset Management segment represented 11.6% and 9.6% of total
segment profit in the first quarter of 2000 and 1999, respectively.
Mortgage Banking Segment
The Mortgage Banking segment originates residential mortgage loans for sale to
the BANK and the secondary market, and provides servicing of these mortgage
loans.
The Mortgage Banking segment's profit for the first quarter of 2000 was
$256,000, a decrease of $431,000 or 62.7% over the same period a year ago.
Mortgage revenues and net interest income declined $1.5 million and $227,000,
respectively, from the first quarter of 1999 as origination volume and
refinancing activity were negatively impacted by increasing interest rates. An
additional factor leading to the decline was a reversal of $446,000 in mortgage
servicing right impairment reserves in the first quarter of 1999. Operating
expenses declined $1.0 million, primarily the result of lower variable
production costs attributable to the lower origination volumes and refinancing
activity.
The Mortgage Banking segment represented 2.1% and 6.0% of total segment profit
in the first quarter of 2000 and 1999, respectively.
CONSOLIDATED EARNINGS ANALYSIS
The analysis below discusses by major components the changes in net income when
comparing the three months ended March 31, 2000 and 1999.
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
<PAGE>
assets are adjusted to a "fully taxable equivalent" basis. The fully taxable
equivalent adjustment was calculated using the statutory federal income tax rate
of 35%. Adjusted interest income is as follows (in thousands):
Quarter Ended Quarter Ended
March 31, 2000 March 31, 1999
-------------- --------------
Interest Income Book Basis $ 78,932 $ 72,892
Taxable Equivalent Adjustment 2,276 2,511
----------- ----------
Interest Income Taxable
Equivalent Basis 81,208 75,403
Interest Expense 45,970 41,109
----------- ----------
Net Interest Income Taxable
Equivalent Basis $ 35,238 $ 34,294
========== ==========
Net interest income on a fully taxable equivalent basis increased $944,000 or
2.8% during the first quarter of 2000 over the same period in 1999. The
improvement in net interest income results mainly from a 4.1% increase in
average earning assets and increased yields on the investment portfolio. These
improvements were partially offset by deposit growth and increased borrowing
needed to fund the growth in earning assets as well as increased rates paid on
deposits and borrowings.
The growth in average earning assets was attributable to double-digit loan
growth offset by a decline in the investment portfolio. Average loans increased
$275.8 million or 11.1% when comparing the first quarters of 2000 and 1999, due
to a strong regional economy and successful sales management initiatives.
Average investment securities declined $94.4 million or 6.7%,
quarter-to-quarter. This planned reduction reflects a change in AMCORE's
investment strategy since the first quarter of 1999 to emphasize liquidity,
reduced interest rate risk and loan growth funding as opposed to enhanced
capital utilization of the investment leveraging program.
The net interest spread is the difference between the average rates on
interest-earning assets and the average rates on interest-bearing liabilities.
The interest rate margin represents net interest income divided by average
earning assets. These ratios can also be used to analyze net interest income.
Since a significant portion of the Company's funding is derived from
interest-free sources, primarily demand deposits and 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 net interest spread decreased 4 basis points
to 2.83% in the first quarter of 2000 when compared to the 2.87% during the same
period in 1999. The net interest margin was 3.44% during the first quarter of
2000, a decrease of 4 basis points from 3.48% in the comparable period in 1999.
<PAGE>
<TABLE>
<CAPTION>
Quarter Ended Quarter Ended
March 31, 2000 March 31, 1999
------------------------------------------- ----------------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
------------------------------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest-Earning Assets:
Taxable securities $1,008,984 $17,503 6.94% $1,069,039 $16,369 6.13%
Tax-exempt securities (1) 304,141 5,840 7.68% 338,466 6,620 7.82%
------------------------------------------- ----------------------------------------
Total Securities (2) 1,313,125 23,343 7.11% 1,407,505 22,989 6.54%
Mortgage loans held for sale (3) 10,304 189 7.34% 32,030 422 5.27%
Loans (1) (4) 2,759,002 57,306 8.34% 2,483,163 51,631 8.40%
Other earning assets 19,066 267 5.62% 17,029 159 3.79%
Fees on mortgage loans held for sale (3) - 103 - - 202 -
------------------------------------------- ----------------------------------------
Total Interest-Earning Assets $4,101,497 $81,208 7.94% $3,939,727 $75,403 7.71%
Non Interest-Earning Assets:
Cash and due from banks 104,433 99,321
Other assets 144,670 158,308
Allowance for loan and lease losses (28,946) (27,163)
---------------- ----------------
Total Assets $4,321,654 $4,170,193
================ ================
Liabilities and Stockholders' Equity
Interest-Bearing Liabilities:
Interest-bearing demand and savings $1,006,960 $8,735 3.48% $ 952,932 $6,496 2.76%
deposits
Time deposits 1,693,546 23,550 5.58% 1,589,036 21,871 5.58%
------------------------------------------- ----------------------------------------
Total interest-bearing deposits 2,700,506 32,285 4.81% 2,541,968 28,367 4.53%
Short-term borrowings 619,732 9,163 5.95% 581,188 8,216 5.73%
Long-term borrowings 295,460 4,522 6.16% 318,232 4,526 5.77%
------------------------------------------- ----------------------------------------
Total Interest-Bearing Liabilities $3,615,698 $45,970 5.11% $3,441,388 $41,109 4.84%
Noninterest-Bearing Liabilities:
Demand deposits 363,600 352,491
Other liabilities 57,029 57,070
---------------- ----------------
Total Liabilities $4,036,327 $3,850,949
Stockholders' Equity 285,327 319,244
---------------- ----------------
Total Liabilities and
Stockholders' Equity $4,321,654 $4,170,193
================ ================
Net Interest Income $35,238 $34,294
============== ============
Net Interest Spread 2.83% 2.87%
============= ============
Interest Rate Margin 3.44% 3.48%
============= ============
</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.
<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. Changes due to rate/volume variances and changes due to the
extra day in 2000 due to leap year have been allocated between changes due to
average volume and changes due to average rate based on the absolute value of
each to the total change of both categories. Because of changes in the mix of
the components of interest-earning assets and interest-bearing liabilities, the
computations for each of the components do not equal the calculation for
interest-earning assets as a total and interest-bearing liabilities as a total.
The table below presents an analysis of the changes in net interest income.
<TABLE>
<CAPTION>
Quarter Ended
March 31, 2000 / March 31, 1999
(in thousands)
----------------------------------------------------------------------
Total Net
Increase (Decrease) Due to Change In Increase
Average Volume Average Rate (Decrease)
----------------------------------------------------------------------
<S> <C> <C> <C>
Interest Income:
Taxable securities $ (954) $ 2,088 $ 1,134
Tax-exempt securities (1)
(661) (119) (780)
----------------------------------------------------------------------
Total Securities (2) 354
(1,597) 1,951
Mortgage Loans held for sale (3)
(358) 125 (233)
Loans (1) (4)
6,031 (356) 5,675
Other earning assets
19 89 108
Fees on mortgage loans held for sale (3)
0 (99) (99)
----------------------------------------------------------------------
Total Interest-Earning Assets $ 3,350 $ 2,455 $ 5,805
----------------------------------------------------------------------
Interest Expense:
Interest-bearing demand and savings $ 1,080 $ 1,159 $ 2,239
deposits
Time deposits
1,689 (10) 1,679
----------------------------------------------------------------------
Total interest-bearing deposits
1,958 1,960 3,918
Short-term borrowings 947
606 341
Long-term borrowings (4)
(319) 315
----------------------------------------------------------------------
Total Interest-Bearing Liabilities $ 2,335 $ 2,526 $ 4,861
----------------------------------------------------------------------
Net Interest Margin / Net Interest Income (FTE) $ 1,015 $ (71) $ 944
======================================================================
</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 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.
The increase in net interest income, when comparing the first quarter of 2000
with the first quarter of 1999, is mainly due to a favorable change in average
volume. Average loans increased 11.1% while average investment securities
declined 6.7%. The positive effects of this net increase were partially offset
by a 6.2% increase in average interest bearing deposits and a 1.8% increase in
average borrowings that was required to fund the growth in average earning
assets.
There was a decrease in net interest income due to changes in average rates,
when comparing the first quarter of 2000 with the first quarter of 1999. Higher
yields on average investment securities were partially offset by lower yields on
average loans resulting in a net increase on average earning assets of 23 basis
points. The net favorable impact on average earning assets was more than offset
by a 27 basis point increase in rates paid on
<PAGE>
average total interest-bearing liabilities. This was largely the result of
higher rates paid on demand and savings deposits, a reflection of the Fed's
policy of increasing interest rates since June 30, 1999. The rising interest
rate environment also adversely affected rates paid on both short-term and
long-term borrowings.
Provision for Loan and Lease Losses
The provision for loan and lease losses is an amount added to the allowance
against which loan and lease losses are charged. Management determines an
appropriate provision for loan losses based upon historical loss experience,
regular evaluation of collectibility by lending officers, credit administration
and the corporate loan review staff, 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 $2.4 million during the first
quarter of 2000, an increase of $164,000 or 7.4% from the same period in 1999.
The increase in the provision largely relates to the growth in total loans.
Annualized net charge-offs to average loans were 0.23% in the first quarter of
2000 and 0.12% during the same period of 1999.
The allowance for loan losses as a percent of total loans was 1.05% and 1.03% at
March 31, 2000 and December 31, 1999, respectively.
Non-Interest Income
Total non-interest income was $14.7 million in the first quarter of 2000, an
increase of $529,000 or 3.7% from the same period in 1999.
Trust and asset management income increased 15.7% or $1.0 million to total $7.6
million for the first three months of 2000 versus the same period in 1999. The
increase was attributable to continued growth of the segment, favorable
investment performance and expansion into recordkeeping and administrative
services for tax-qualified retirement plans following the March 31, 1999
acquisition of WCV. As of March 31, 2000, trust assets under management totaled
$4.4 billion, including $1.5 billion in the Vintage Mutual Fund family. Total
assets under administration, which include managed and custodial assets, totaled
$5.2 billion.
Service charges on deposits increased $396,000 or 17.9% from the first quarter
of 1999 to $2.6 million for the first quarter of 2000. An increase in average
deposit balances of $169.6 million or 5.9% from the first quarter 1999 to the
first quarter 2000, revised fee schedules and overdraft handling processes
contributed to the increase in fee income.
Mortgage revenues decreased $1.6 million or 63.6% as origination volume and
refinancing activity were negatively impacted by increasing interest rates. An
additional factor leading to the decline was a reversal of $446,000 in mortgage
servicing right impairment reserves in the first quarter of 1999.
Other income increased to $2.9 million in the first quarter of 2000, a $231,000
or 8.8% increase from the $2.6 million in the same period a year ago. Brokerage
commission income and customer services charges largely accounted for the
increase. These increases were partially offset by lower insurance commission
income resulting from the sale of AMCORE's insurance agency business on August
27, 1999.
Net security gains totaled $703,000 in the first quarter of 2000 as compared to
$193,000 in the first quarter of 1999. The level of security gains or losses is
dependent on the size of the available for sale portfolio, interest rate levels,
AMCORE's liquidity needs, and balance sheet risk objectives.
<PAGE>
Operating Expenses
Operating expenses totaled $29.7 million for the first quarter of 2000, a
decrease of $134,000 from the first quarter of 1999. The decrease is primarily
related to lower personnel and loan processing and collection expenses,
partially offset by increased advertising and business development expenses and
increased equipment expenses.
The efficiency ratio for the first quarter of 2000 was 59.08%, a 222 basis point
improvement from 61.30% in the first quarter of 1999. The improvement was the
result of increased revenues coupled with lower expenses, quarter-to-quarter.
Personnel costs, which include compensation expense and employee benefits, are
the largest component of operating expenses. Personnel costs totaled $16.2
million in the first quarter of 2000, a decrease of $512,000 or 3.1% from the
first quarter of 1999. Cost savings from AMCORE's new CFOS structure more than
offset normal merit increases and cost-of-living adjustments, growth of the
trust and asset management segment, increased employee health benefit costs and
year-to-year inflation increases.
Equipment expense increased $178,000 or 8.5% from the first quarter of 1999 to
total $2.3 million. The increase is primarily attributable to increased software
amortization, maintenance and other related costs associated with the upgrade of
internal LAN networks, Year 2000 compliance solutions and AMCORE Online!, an
on-line banking product.
Advertising and business development expense increased $237,000 or 31.8% from
the first quarter of 1999 to total $983,000. The increase is mainly the result
of the timing of various promotional campaigns and programs and launching of
AMCORE Online!.
Other operating expenses included a $361,000 decrease in loan processing and
collection expense from the first quarter of 1999 that was largely offset by
environmental remediation expenses of $93,000, increased travel and
entertainment expenses of $84,000, expenses associated with foreclosed property
of $73,000 and robbery losses of $70,000.
Income Taxes
Income tax expense increased $627,000 to $4.6 million for the first quarter of
2000. The increase is due primarily to the increase in income before taxes. The
effective tax rate for the first quarter of 2000 was 29.1% compared to 28.1% for
the same period in 1999.
Balance Sheet Review
Total assets were $4.4 billion at March 31, 2000, an increase of $22.0 million
or 0.5% from December 31, 1999. Total earning assets increased $77.0 million
from December 31, 1999. The increase was partially funded by a decrease in
non-earning assets of $55.0 million over the same period. The decrease was
primarily attributable to reductions in excess cash that had been held for
potential Year 2000 related withdrawals and seasonal decreases in cash
equivalents. The remaining increase in earning assets was funded by a $127.9
million increase in deposits from December 31, 1999. The increase in deposits
also largely funded a $97.4 million reduction in borrowings and a $10.8 million
net reduction in stockholders' equity from December 31, 1999.
The decline in stockholders' equity is due principally to the acquisition of
treasury shares in connection with AMCORE's announced share repurchase program,
normal dividend distributions and unrealized losses on available for sale
securities.
<PAGE>
ASSET QUALITY REVIEW
Allowance for Loan and Lease Losses
The allowance for loan and lease losses was $29.2 million at March 31, 2000, an
increase of $789,000 from December 31, 1999. The allowance represented 1.05% of
total loans and 130.7% of non-performing loans at March 31, 2000. The comparable
ratios were 1.03% and 154.06% at December 31, 1999.
Net charge-offs were $1.6 million during the first quarter of 2000 versus
$710,000 for the same quarter of 1999. The increase in net charge-offs was
primarily attributable to the higher charge-offs of installments and consumer
loans.
An analysis of the allowance for loan losses as of March 31, 2000 and 1999 is
presented below:
For the Three Months Ended
March 31, 2000 March 31, 1999
-------------- --------------
(in thousands)
Balance at beginning of period $28,377 $26,403
Charge Offs:
Commercial, financial and agricultural 506 198
Real estate 517 117
Installment and consumer 1,149 799
--------------- ---------------
2,172 1,114
Recoveries:
Commercial, financial and agricultural 369 73
Real estate 38 10
Installment and consumer 164 321
--------------- ---------------
571 404
Net Charge-Offs 1,601 710
Provision charged to expense 2,390 2,226
--------------- ---------------
Balance at end of period $29,166 $27,919
=============== ===============
Ratio of net-charge-offs during the
period to average loans outstanding
during the period (1) 0.23% 0.12%
=============== ===============
Allowance to non-performing loans 130.67% 124.50%
Allowance to ending loans 1.05% 1.11%
(1) On an annualized basis
<PAGE>
Non-Performing Assets
Non-performing assets increased $4.2 million from December 31, 1999 to $25.7
million at March 31, 2000. Non-performing assets as of March 31, 2000 and
December 31, 1999 are presented below.
<TABLE>
<CAPTION>
March 31, 2000 December 31,1999
----------------------------------------------
(in thousands)
<S> <C> <C>
Impaired loans:
Non-accrual loans and leases
Commercial.................................. $ 16,913 $ 12,632
Real estate................................. 3,069 3,278
Other non-performing:
Non-accrual loans (1)....................... 2,339 2,509
----------------------------------------------
Total non-performing loans.................. $ 22,321 $ 18,419
==============================================
Foreclosed assets..............................
Real estate................................. 2,137 2,675
Other....................................... 1,226 368
----------------------------------------------
Total foreclosed assets....................... $ 3,363 $ 3,043
==============================================
Total non-performing assets...................... $ 25,684 $ 21,462
Loans 90 days or more past due and still accruing.. $ 6,647 $ 10,197
</TABLE>
(1) These loans are not considered impaired since they are part of a small
balance homogeneous portfolio.
Capital Management
Total stockholders' equity was $282.9 million at March 31, 2000, a decrease of
$10.8 million from December 31, 1999. The book value per share of AMCORE common
stock was $10.44 and $11.06 at March 31, 2000 and 1999, respectively. AMCORE
paid $.16 and $.14 per share dividends during the first quarter of 2000 and
1999, respectively.
On November 24, 1999, AMCORE announced a stock repurchase program for up to five
percent of its common stock or 1.41 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 March 31, 2000, 965,741 shares have been
repurchased at an average price of $20.98.
The BANK is considered a "well capitalized" institution based on regulatory
guidelines. AMCORE's leverage ratio of 7.72% at March 31, 2000 exceeds the
regulatory guidelines of 5% for well-capitalized institutions. AMCORE's ratio of
Tier I capital at 11.13% and total risk based capital of 12.10% significantly
exceed the regulatory minimums. To be categorized as well capitalized, a company
must maintain minimum total risk based, Tier I risk based and Tier I leverage
ratios as set forth in the table below.
<PAGE>
<TABLE>
<CAPTION>
March 31, 2000 March 31, 1999
--------------- --------------
Amount Ratio Amount Ratio
------ ----- ------ -----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Total Capital $361,527 12.10% $359,573 12.99%
Total Capital Minimum 238,981 8.00% 221,531 8.00%
-------- ------- -------- -------
Amount in Excess of Minimum $121,546 4.10% $138,042 4.99%
======== ======= ======== =======
Tier I Capital (to Risk Weighted Assets) $332,361 11.13% $331,654 11.98%
Tier I Capital Minimum 119,491 4.00% 110,766 4.00%
-------- ------- -------- -------
Amount in Excess of Minimum $212,870 7.13% $220,888 7.98%
======== ======= ======== =======
Tier I Capital (to Average Assets) $332,361 7.72% $331,654 7.99%
Tier I Capital Minimum 172,208 4.00% 166,047 4.00%
-------- ------- -------- -------
Amount in Excess of Minimum $160,153 3.72% $165,607 3.99%
======== ======= ======== =======
Risk adjusted assets $2,987,268 $2,769,138
========== ==========
Average assets $4,303,781 $4,151,164
========== ==========
</TABLE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
A comprehensive qualitative and quantitative analysis regarding market risk was
disclosed in the Company's December 31, 1999 Form 10K. There have been no
material changes in the assumptions used or result obtained regarding market
risk.
<PAGE>
PART II.
- --------
ITEM 1. Legal Proceedings
Management believes that no litigation is threatened or pending in which AMCORE
faces potential loss or exposure which will materially affect AMCORE's financial
position or results of operations, other than noted below. Since AMCORE's
subsidiaries act as depositories of funds, trustee and escrow agents, they are
named as defendants in lawsuits involving claims to the ownership of funds in
particular accounts. This and other litigation is incidental to AMCORE's
business.
On August 26, 1999, Willie Parker and five other plaintiffs filed a civil action
in the Circuit Court of Humphreys County, Mississippi against AMCORE Consumer
Finance Company, Inc., a subsidiary of AMCORE, and other defendants containing
twelve separate counts related to the sale and financing of residential
satellite dish systems. Though the actual purchase price for each of these
systems involves a principal amount of less than $3,000, the complaint prays for
economic loss and compensatory damages in the amount of $5 million for each
plaintiff and punitive damages in the amount of $100 million for each plaintiff.
AMCORE has denied the plaintiffs' allegations and has removed the case to the
United States District Court for the Northern District of Mississippi. The
proceedings are currently stayed pending resolution of the plaintiffs' motion to
remand the case to the state court. Although at this early date the ultimate
disposition of the case cannot be predicted with certainty, based on information
currently available, AMCORE believes that the plaintiffs' damage claims are
disproportionate and that the final outcome of the case will not have a
materially adverse effect on AMCORE's consolidated financial condition, though
it could have a materially adverse affect on AMCORE's consolidated results of
operations in a given year. AMCORE has not recorded an accrual for payment of
the damages in this case because, in management's opinion, an unfavorable
outcome in this litigation is not probable.
ITEM 4. Submission of Matters to a Vote of Security Holders
(a) AMCORE Financial, Inc. 1999 Annual Meeting of Stockholders was held on
May 9, 2000.
(b) Proxies were solicited by AMCORE Financial, Inc. management for the
purpose of electing three Class II directors whose term will expire in
2003. The following individuals were elected as Class II directors:
Name Votes For Votes Withheld
---- --------- --------------
Milton R. Brown 20,331,124 2,535,372
Richard C. Dell 20,369,084 2,497,412
William R. McManaman 20,334,473 2,532,023
(c) Proxies were solicited by AMCORE Financial, Inc. management to ratify
the appointment of KPMG LLP as independent auditors. The appointment of
KPMG LLP was ratified via 21,797,286 votes for, 339,110 votes against,
and 730,100 votes abstaining the ratification of the appointment.
(d) Proxies were solicited by AMCORE Financial, Inc. management to approve
the AMCORE Financial, Inc. 2000 Stock Incentive Plan. The plan was
approved via 13,714,051 votes for, 5,403,451 votes against, 523,332
votes abstaining, and 3,225,662 broker non-votes.
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 9, 2000.
<PAGE>
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).
27 Financial Data Schedule
99 Additional exhibits - Press release dated April 19, 2000.
<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: May 15, 2000
/s/ John R. Hecht
------------------------------------------
John R. Hecht
Executive Vice President and Chief
Financial Officer (Duly authorized officer
of the registrant and principal financial
officer)
Exhibit 3.1
ADOPTED: 5-9-2000
BYLAWS
OF
AMCORE FINANCIAL, INC.
----------------------
ARTICLE I
OFFICES
-------
The principal office of the corporation in the State of Nevada shall be
located in the City of Reno, County of Washoe. The corporation may have such
other offices, either within or without the State of Nevada, as the board of
directors may designate or as the business of the corporation may require from
time to time.
ARTICLE II
STOCKHOLDERS
------------
Section 1. Annual Meeting. The annual meeting of the stockholders shall
be held on the first Tuesday in the month of May in each year, at the hour set
forth in the notice of meeting, or at such other time or on such other day
within thirty days as shall be fixed by the board of directors for the purpose
of electing directors and for the transaction of such other business as may come
before the meeting. If the day fixed for the annual meeting shall be a legal
holiday, such meeting shall be held on the next succeeding business day. If the
election of directors shall not be held on the day designated herein for any
annual meeting of the stockholders, or at any adjournment thereof, the board of
directors shall cause the election to be held at a special meeting of the
stockholders as soon thereafter as may be convenient.
Section 2. Special Meetings. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by statute may be called by
the chairman of the board, chief executive officer or by the board of directors.
<PAGE>
Section 3. Place of Meeting. The board of directors may designate any
place, either within or without the State of Nevada, as the place of meeting for
any annual meeting or for any special meeting called by the board of directors.
A special meeting called by the chairman of the board or by the chief executive
officer shall be held at such place, either within or without the State of
Nevada, as may be designated in the notice of such meeting. A waiver of notice
signed by all stockholders entitled to vote at a meeting may designate any
place, either within or without the State of Nevada, as the place for the
holding of such meeting. If no designation is made, the place of meeting shall
be the principal office of the corporation in the State of Nevada.
Section 4. Notice of Meeting. Notice of any annual or special meeting
of stockholders shall be given to each stockholder of record entitled to vote at
such meeting by written notice signed by the chairman of the board, the chief
executive officer, a vice president, the secretary, or the assistant secretary
of the corporation, or by such other person or persons as the board of directors
shall designate, stating the purpose or purposes for which the meeting is called
and the time and the place, which may be within or without the State of Nevada,
where it is to be held. A copy of such notice shall be either delivered
personally to, or shall be mailed postage prepaid, to each stockholder of record
entitled to vote at such meeting not less than ten nor more than sixty days
before such meeting. If mailed, it shall be directed to a stockholder at his
address as it appears upon the records of the corporation, and upon such mailing
of any such notice the service thereof shall be complete, and the time of the
notice shall begin to run from the date upon which such notice is deposited in
the mail for transmission to such stockholder. Delivery of any such notice to
any officer of a corporation or association or to any member of a partnership,
shall constitute delivery of such notice to such corporation, association or
partnership.
Section 5. Closing of Transfer Books or Fixing of Record Date. For the
purposes of determining stockholders entitled to notice of or to vote at any
meeting of stockholders or any adjournment thereof, or stockholders entitled to
receive payment of any dividend, or in order to make a determination of
stockholders for any other proper purpose, the board of directors may fix in
advance a date as the record date for such determination of stockholders, such
date in any case to be not more than sixty days, and, in the case of a meeting
of stockholders, not less than ten days prior to the date on which the
particular action requiring such determination of stockholders is to be taken.
If no record date is fixed for the determination of stockholders entitled to
notice of or to vote at a meeting of stockholders, or stockholders entitled to
receive payment of a dividend, the date on which notice of the meeting is mailed
or the date on which the resolution of the board of directors declaring such
dividend is adopted, as the case may be, shall be the record date for such
determination of stockholders. When a determination of stockholders entitled to
vote at any meeting of stockholders has been made as provided in this Section,
such determination shall apply at any adjournment thereof.
2
<PAGE>
Section 6. Inspectors. The board of directors may, in advance of any
stockholders meeting, appoint one or more inspectors to act at the meeting or
any adjournment thereof. If inspectors are not so appointed, the person
presiding at a stockholders' meeting may, and on the request of any stockholder
entitled to vote there at, shall make such appointment. In case any person
appointed as inspector fails to appear or act, the vacancy may be filled by
appointment made by the board of directors in advance of the meeting or at the
meeting by the person presiding at the meeting. The inspectors shall determine
the number of shares outstanding and the voting power of each, the shares
represented at the meeting, the existence of a quorum, the validity and effect
of proxies and shall receive votes, hear and determine all challenges and
questions arising in connection with the right to vote, count and tabulate all
votes, determine the result and do such acts as are proper to conduct the
election or vote with fairness to all stockholders. If there are three or more
inspectors, the act of a majority shall govern.
Section 7. Quorum. A majority of the outstanding shares of the
corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of stockholders. In the absence of a quorum, a
majority of the shares represented at a meeting of stockholders may adjourn the
meeting from time to time without further notice. At such adjourned meeting at
which a quorum shall be present or represented, any business may be transacted
which might have been transacted at the meeting as originally noticed. The
stockholders present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
Section 8. Proxies. At any meeting of the stockholders of the
corporation any stockholder may be represented and vote by proxy or proxies
appointed by an instrument in writing. In the event that any such instrument in
writing shall designate two or more persons to act as proxies, a majority of
such persons present at the meeting, or, if only one shall be present, then that
one shall have and may exercise all of the powers conferred by such written
instrument upon all of the persons so designated unless the instrument shall
otherwise provide.
No such proxy shall be valid after the expiration of six months from
the day of its execution, unless coupled with an interest, or unless the person
executing it specifies therein the length of time for which it is to continue in
force, which in no case shall exceed seven years from the date of its execution.
Subject to the above, any proxy duly executed is not revoked and continues in
full force and effect until an instrument revoking it or a duly executed proxy
bearing a later date is filed with the secretary of the corporation.
Section 9. Voting of Shares. Each holder of common stock shall be
entitled to one vote for each share thereof held upon each matter submitted to a
vote at a meeting of stockholders. The election of each director shall
constitute a matter submitted to a vote, and each stockholder shall be entitled
to cast his votes for a nominee for each director to be elected on a
noncumulative basis. Whenever directors are to be elected by the stockholders,
they shall be elected by a plurality of the votes cast at the election.
3
<PAGE>
Whenever any action, other than the election of directors, is to be taken by a
vote of the stockholders, it shall, except as otherwise required by law, be
authorized by a majority of the votes cast at a meeting of stockholders by the
holders of shares entitled to vote thereon.
Section 10. Voting of Shares by Certain Holders. Shares standing in the
name of another corporation may be voted by such officer, agent or proxy as the
bylaws of such corporation may prescribe, or, in the absence of such provision,
as the board of directors of such other corporation may determine.
Shares standing in the name of a deceased person, a minor ward or an
incompetent person, may be voted by his administrator, executor, court appointed
guardian or conservator, either in person or by proxy without a transfer of such
shares into the name of such administrator, executor, court appointed guardian
or conservator. Shares standing in the name of a trustee may be voted by the
trustee, either in person or by proxy, but no trustee shall be entitled to vote
shares held by the trustee without a transfer of such shares into the trustee's
name.
Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer thereof into the receiver's name if authority
so to do be contained in an appropriate order of the court by which such
receiver was appointed.
A stockholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Treasury shares of its own stock held by the corporation shall not be
voted, directly or indirectly, at any meeting and shall not be counted in
determining the total number of outstanding shares at any given time, but shares
of its own stock held by it in a fiduciary capacity may be voted and shall be
counted in determining the total number of outstanding shares at any given time.
Section 11. Voting Record. The officer or agent having charge of the
stock transfer books for shares of the corporation shall make a complete record
of the stockholders entitled to vote at each meeting of stockholders or any
adjournment thereof, arranged in alphabetical order, with the address of and the
number of shares held by each. Such record shall be available for inspection by
the inspectors appointed to act at the meeting or by any stockholder present at
the meeting upon request made to the person presiding at such meeting.
4
<PAGE>
Section 12. Formal Action by Stockholders Required. Any action required
or permitted to be taken by the stockholders of the corporation must be effected
at a duly called annual or special meeting of stockholders and may not be
effected by written consents of such stockholders.
ARTICLE III
BOARD OF DIRECTORS
------------------
Section 1. General Powers. The business and affairs of the corporation
shall be managed by its board of directors.
Section 2. Number, Tenure and Qualifications. The board of directors of
the corporation shall consist of such number of directors, not less than three
nor more than twelve, as shall be fixed from time to time by the board of
directors. Each director shall hold office until the annual meeting of
stockholders of the year in which his term of office expires and until his
successor shall have been elected and qualified.
Section 3. Nomination of Directors. Only persons who are nominated in
accordance with the following procedures shall be eligible for election as
directors at an annual meeting. Nominations of persons for election to the board
of the corporation at the annual meeting may be made at a meeting of
stockholders by or at the direction of the board of directors by any nominating
committee or person appointed by the board or by any stockholder of the
corporation entitled to vote for the election of directors at the meeting who
complies with the notice procedures set forth in this Section 3 of Article III.
Such nominations, other than those made by or at the direction of the board,
shall be made pursuant to timely notice in writing to the secretary of the
corporation. To be timely, a stockholder's notice shall be delivered to or
mailed and received at the principal executive offices of the Company not less
than 50 days nor more than 75 days prior to the meeting.
Such stockholder's notice to the secretary shall set forth (a) as to
each person whom the stockholder proposes to nominate for election or
re-election as a director: (i) the name, age, business address and residence
address of the person; (ii) the principal occupation or employment of the
person; (iii) the class and number of shares of capital stock of the corporation
which are beneficially owned by the person and (iv) any other information
relating to the person that is required to be disclosed in solicitations for
proxies for election of directors pursuant to Rule 14a under the Securities
Exchange Act of 1934, as amended; and (b) as to the stockholder giving the
notice: (i) the name and record address of stockholder and (ii) the class and
number of shares of capital stock of the corporation which are beneficially
owned by the stockholder. The corporation may require any proposed nominee to
furnish such other information as may reasonably be required by the corporation
to determine the eligibility of such proposed nominee to serve as director of
the corporation.
5
<PAGE>
The Board of Directors may also elect directors, in the event either of
a vacancy or an increase in the number of directorships established, for the
term set forth in the Articles of Incorporation.
No person shall be eligible for election as a director of the
corporation unless nominated in accordance with the procedures set forth herein.
The chairman of the meeting shall, if the facts warrant, determine and declare
to the meeting that a nomination was not made in accordance with the foregoing
procedure, and if he should so determine, he shall so declare to the meeting and
the defective nomination shall be disregarded.
Section 4. Regular Meetings. The regular annual meeting of the board of
directors shall be held on the same day as the shareholders annual meeting, at
the hour set forth in the notice of the meeting, or at such other time or on
such other day within thirty days as shall be fixed by the board of directors.
Regular meetings of the board of directors shall be held in February, May,
August and November of each year, without notice other than this bylaw, on the
Wednesday following the second Tuesday of each such month, at such time and
place, either within or without the State of Nevada, as the board of directors
may from time to time determine by resolution. In addition, the board of
directors may provide, by resolution, the time and place, either within or
without the State of Nevada, for the holding of additional regular meetings
without other notice than such resolution.
Section 5. Special Meetings. Special meetings of the board of directors
may be held by or at the request of the chairman of the board, the chief
executive officer or any two directors. The person or persons authorized to call
special meetings of the board of directors may fix any place, either within or
without the State of Nevada, as the place for holding any special meeting of the
board of directors called by them.
Section 6. Notice. Notice of any special meeting shall be given at
least two days previously thereto by written notice delivered personally or
mailed to each director at his business address, or by telegram. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail,
so addressed, with postage thereon prepaid. If notice be given by telegram, such
notice shall be deemed to be delivered when the telegram is delivered to the
telegraph company. The attendance of a director at a meeting shall constitute a
waiver of notice of such meeting, except where a director attends a meeting for
the express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the board
of directors need be specified in the notice or waiver of notice of such
meeting.
Section 7. Quorum. A majority of the board of directors shall
constitute a quorum for the transaction of business at any meeting of the board
of directors, provided that if less than a majority of the directors are present
at said meeting, a majority of the directors present may adjourn the meeting
from time to time without further notice.
6
<PAGE>
Section 8. Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors.
Section 9. Action Without a Meeting. Any action required or permitted
to be taken at any meeting of the board of directors or of any committee thereof
may be taken without a meeting if a written consent thereto is signed by all of
the members of the board or of such committee, as the case may be. Such written
consent shall be filed with the minutes of proceedings of the board or
committee.
Section 10. Meetings by Conference Telephone or Similar Communications
Method. Members of the board of directors of the corporation or of any committee
designated by the board, may participate in a meeting of the board or such
committee by means of a conference telephone network or a similar communications
method by which all persons participating in the meeting can hear each other.
Any meeting held in such manner shall be held at a place providing access to a
conference telephone network or similar communications method which permits
members of the board of directors or committee to participate in the meeting in
accordance with this Section without being present at the meeting. Participation
in a meeting in such manner shall constitute presence in person at such meeting.
Section 11. Vacancies. Any vacancy occurring in the board of directors
may be filled by the affirmative vote of a majority of the remaining directors
though less than a quorum of the board of directors. A director elected to fill
a vacancy shall be elected for the unexpired term of his predecessor in office.
Any directorship to be filled by reason of an increase in the number of
directors may be filled by election by the board of directors for a term of
office continuing only until the next election of directors by the stockholders.
Section 12. Compensation. By resolution of the board of directors, each
director may be paid his expenses, if any, of attendance at each meeting of the
board of directors or any committee thereof, and may be paid a stated salary as
director or a fixed sum for attendance at each meeting or both. For the purposes
of this Section, participation in a meeting of the board of directors or any
committee thereof by means of a conference telephone network or a similar
communications method shall constitute attendance at such meeting. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor.
Section 13. Presumption of Assent. A director of the corporation who is
present at a meeting of the board of directors at which action on any corporate
matter is taken shall be presumed to have assented to the action unless his
dissent shall be entered in the minutes of the meeting or unless he shall file
his written dissent to such action with the secretary of the board before the
adjournment thereof or shall forward such dissent by registered mail to the
secretary of the board immediately after the adjournment of the meeting. Such
right to dissent shall not apply to a director who voted in favor of such
action.
7
<PAGE>
Section 14. Emeritus Directors. The board of directors may, by
resolution passed by a majority of the whole board, designate a director of the
corporation who has retired to the honorary position of an emeritus director or
any other designation as determined by the board. Emeritus directors shall not
manage the business or affairs of the corporation. An emeritus director who was
elected by the board of directors at the 1996 annual meeting of shareholders, or
earlier, may receive compensation as set forth in a policy adopted by the board
of directors. Emeritus directors elected by the board of directors subsequent to
the 1996 annual meeting of stockholders shall receive no compensation for being
designated an emeritus director or any other emeritus designation.
ARTICLE IV
EXECUTIVE COMMITTEES
--------------------
Section 1. Appointment and Authority. The board of directors may, by
resolution or resolutions passed by a majority of the whole board, designate one
or more executive committees, each committee to consist of one or more of the
directors and may include officers of the corporation, unless prohibited by law
or these bylaws, one of whom shall be designated as chairman, which, to the
extent provided in the resolution or resolutions, shall have and may exercise
the powers of the board of directors in the management of the business and
affairs of the corporation, and may have power to authorize the seal of the
corporation to be affixed to all papers on which the corporation desires to
place a seal, except that no such committee shall have the authority of the
board of directors in reference to: (a) amending the Articles of Incorporation;
(b) adopting a plan of merger or consolidation; (c) recommending to the
stockholders the sale, lease or other disposition of all or substantially all of
the property and assets of the corporation otherwise than in the usual and
regular course of its business; (d) recommending to the stockholders a voluntary
dissolution of the corporation or a revocation thereof; (e) making, altering,
amending or repealing any bylaws of the corporation; (f) electing, appointing or
removing any director or officer of the corporation; (g) submitting to
stockholders any action that requires stockholders' approval; (h) amending or
repealing any resolution theretofore adopted by the whole board of directors; or
(i) declaring dividends. Such committee or committees shall have such name or
names as may be determined from time to time by resolution adopted by the board
of directors. The designation of each such committee and the delegation thereto
of authority shall not operate to relieve the board of directors, or any member
thereof, of any responsibility imposed by law.
Section 2. Tenure and Qualifications. Each member of an executive
committee shall hold office until the next regular annual meeting of the board
of directors following his or her designation and until his or her successor is
designated as a member of the committee and qualified.
Section 3. Meetings. Meetings of an executive committee may be held at
such times and places as the chairman, chief executive officer or chairman of
the committee may determine. Special meetings of an executive committee may be
called by any
8
<PAGE>
member thereof upon not less than two day's notice stating the place, date and
hour of the meeting, which notice may be written or oral, and if mailed, shall
be deemed to be delivered when deposited in the United States mail addressed to
the member of the committee at his business address. Any member of an executive
committee may waive notice of any meeting and no notice of any meeting need be
given to any member thereof who attends in person. The notice of a meeting of an
executive committee need not state the business proposed to be transacted at the
meeting.
Section 4. Quorum. A majority of the members of an executive committee
shall constitute a quorum for the transaction of business at any meeting
thereof, and action of the committee must be authorized by the affirmative vote
of a majority of the members present at a meeting at which a quorum is present.
Section 5. Vacancies. Any vacancy in an executive committee may be
filled by a resolution adopted by a majority of the full board of directors.
Section 6. Resignations and Removal. Any member of an executive
committee may be removed at any time with or without cause by resolution adopted
by a majority of the full board of directors. Any member of an executive
committee may resign from the committee at any time by giving written notice to
the chairman or secretary of the corporation, and unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
Section 7. Procedure. Each committee chairman and secretary shall be
appointed by the board of directors. The committee may fix its own rules of
procedures and adopt its own charters which shall not be inconsistent with these
bylaws or the law. It shall keep regular minutes of its meetings and actions and
report the same to the board of directors for its information and ratification,
if applicable, at the next meeting of the board of directors.
Section 8. Executive Management Committee. One of the executive
committees shall be an executive management committee which shall meet as
needed. Its duties shall include the management of the business and affairs of
the corporation when the board of directors is not in session. It shall have all
of the powers, duties, responsibilities and authority of the board except as
prohibited by law and Section 1, Article IV, of these bylaws.
Section 9. Audit Committee. One of the executive committees shall be an
audit committee, which shall meet a minimum of three times per year. The members
of the audit committee shall be directors of the corporation who are not
officers engaged in the management of the corporation. Its duties shall include
reviewing the proposed scope of the annual audit and the results and
recommendations of the independent auditors on completion of the annual audit;
recommending to the board of directors a firm of independent auditors whose
appointment shall be submitted to the stockholders for ratification at the
annual meeting; recommending the compensation of the independent
9
<PAGE>
auditors; reviewing the system of internal controls of the corporation and its
subsidiaries and the performance of its internal audit services; monitoring
compliance by management with certain policies of the corporation.
Section 10. Compensation Committee. One of the executive committees
shall be a compensation committee which shall meet not less than once a year.
Its duties shall include reviewing and recommending the compensation of the
executive officers and compensation programs for the corporation to the board of
directors.
Section 11. Investment Committee. One of the executive committees shall
be an investment committee which shall meet a minimum of three times per year.
Its duties shall include reviewing and directing the investments held by the
corporation or its subsidiaries as corporate funds. It shall review, formulate
and adopt investment policies and, if appropriate, select, review, appoint,
monitor and terminate investment managers.
ARTICLE V
OFFICERS
--------
Section 1. Number. The officers of the corporation and the number of
them to be assigned to each level of responsibility shall be elected and
determined by the board of directors and may include a chairman, a vice
chairman, chief executive officer, president (who, if a separate chief executive
officer is not named, shall be chief executive officer), executive vice
president, senior vice president, vice president treasurer, auditor, secretary
and assistant secretary. Functional designations as, and appointments of, chief
operating officer, chief financial officer, chief administrative officer, chief
marketing officer, controller, and such other officers and assistant officers as
may be deemed necessary from time to time, shall be made by the board of
directors. In addition, the corporation shall have a resident agent in the State
of Nevada, which agent shall be appointed by the board of directors. Any two or
more offices may be held by the same person.
Section 2. Election and Term of Office. The officers of the corporation
to be elected by the board of directors shall be elected annually by the board
of directors at the annual meeting of the board. If the election of officers
shall not be held at such meeting, such election shall be held as soon
thereafter as may be convenient. Each officer shall hold office until his
successor shall have been duly elected and shall have qualified or until his
death or until he shall resign or shall have been removed in the manner
hereinafter provided.
Section 3. Removal. Any officer may be removed by the board of
directors whenever in its judgment the best interests of the corporation will be
served thereby, such removal shall be without prejudice to the contract rights,
if any, of the person so removed. Election or appointment of an officer shall
not of itself create contract rights.
10
<PAGE>
Section 4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the board
of directors for the unexpired portion of the term.
Section 5. Chairman. The chairman shall preside at all meetings of the
board of directors and at all meetings of the stockholders. The chairman shall
also perform such other duties as may be assigned to him from time to time by
the board of directors.
Section 6. Chief Executive Officer. The chief executive officer of the
corporation, subject to the control of the board of directors, shall in general
supervise and control all of the business and affairs of the corporation. The
chief executive office will assume specific responsibility and the authority
necessary to assure the desired conduct, operations, and results of the
corporation officers reporting directly to him, as well as the senior executive
officer of each and all affiliate banks or subsidiary companies, whose overall
responsibility is the successful management and administration of his or her
respective bank or company, except that the chief executive officer shall not be
empowered to cause the senior executive officer of an affiliate bank or
subsidiary company to undertake any act or omission contrary to law, or
inconsistent with the rules and regulations or the directives of a regulatory
authority, or which would create personal liability for any director or officer
of such affiliate bank or subsidiary company. He or she shall, in the absence of
the chairman of the board, preside at all meetings of the stockholders and of
the board of directors. He may vote any shares or other securities of any
domestic or foreign corporation of any kind or type or of any federal
instrumentality or association which may at any time be owned by the
corporation, may execute any stockholders' or other consents or waivers in
respect thereof, and a certified copy of this bylaw provision together with a
certificate of incumbency delivered to an issuer of such stock or security shall
constitute the proxy of this corporation for the chief executive officer to
execute, such powers shall remain in force from the date of such delivery until
there shall have been delivered to such issuer a certified amendment of this
bylaw provision or a certified instrument revoking such incumbency. The chief
executive officer may in his or her discretion delegate such powers by executing
proxies, or otherwise, on behalf of the corporation. He or she may sign, with
the secretary or any other proper officer of the corporation as authorized by
the board of directors, certificates for shares of the corporation, deeds,
mortgages, bonds, contracts or other instruments which the board of directors
has authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the board of directors or by these
bylaws to some other officer or agent of the corporation, or shall be required
by law to be otherwise signed or executed; and in general shall perform all
duties incident to the office of chief executive officer and such other duties
as may be prescribed by the board of directors from time to time.
Section 7. President. The president shall have such duties as may be
prescribed by the board of directors from time to time.
11
<PAGE>
Section 8. Executive Vice President; Senior Vice President; Vice
President. Except as otherwise provided in this ARTICLE V, in the absence of the
chief executive officer or in the event of his death, inability or refusal to
act, the individual serving as the executive vice president and/or chief
operating officer of the corporation, or if there is none, the individual
serving as executive vice president and/or chief financial officer of the
corporation, or if there is none, the executive vice president and/or chief
administrative officer, or if there is none, the president or one of the senior
vice presidents, in the order designated at the time of their election, or in
the absence of any designation, then in the order of their election, shall
perform the duties of the chief executive officer, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the chief
executive officer. Any vice president of any rank may sign, with the secretary
or an assistant secretary, certificates for shares of the corporation, and shall
perform such other duties as from time to time may be assigned to him by the
chief executive officer.
Section 9. Secretary. The secretary and any assistant secretary shall:
(a) see that all notices are duly given in accordance with the provisions of
these bylaws or as required by law; (b) be custodian of the corporate records
and of the seal of the corporation and see that the seal of the corporation is
affixed to all documents the execution of which on behalf of the corporation
under its seal is duly authorized; (c) keep a register of the address of each
stockholder which shall be furnished to the secretary by such stockholder; (d)
sign with the chief executive officer, the president, or a vice president,
certificates for shares of the corporation, the issuance of which shall have
been authorized by resolution of the board of directors; (e) have general charge
of the stock transfer books of the corporation; (f) shall keep the minute book
of the corporation, record therein the minutes of all meetings of the board of
directors and of the shareholders of the corporation (except only in the event
of an executive session of the board of directors at which only directors shall
be present), and read and submit for approval such minutes at the next meeting
of the board of directors or stockholders, as the case may be, unless copies of
such minutes have been distributed or made available to all persons in
attendance at such subsequent meeting, in which event the reading of the minutes
may be dispensed with by motion; and (g) in general perform all duties incident
to the office of secretary and such other duties as from time to time may be
assigned to him by the chief executive officer or by the board of directors.
Section 10. Treasurer. The treasurer shall: (a) have charge and custody
of and be responsible for all funds and securities of the corporation; (b)
receive and give receipts for moneys due and payable to the corporation from any
source whatsoever, and deposit all such moneys in the name of the corporation in
such banks, trust companies or other depositories as shall be selected in
accordance with the provisions of Article VI of these bylaws; and (e) in general
perform all of the duties incident to the office of treasurer and such other
duties as from time to time may be assigned to him by the chief executive
officer or by the board of directors. If required by the board of directors, the
treasurer shall give a bond for the faithful discharge of his duties in such sum
and with such surety or sureties as the board of directors shall determine.
12
<PAGE>
Section 11. Resident Agent. The resident agent shall hold office until
a successor shall have been appointed and shall have qualified. The resident
agent may be either an individual or a corporation, shall reside or be located
in the State of Nevada, shall have charge of the principal office of the
corporation in the State of Nevada and shall perform those duties specified by
the laws of the State of Nevada but shall otherwise have no authority to act on
behalf of the corporation. The resident agent may be removed by the board of
directors at its pleasure, but such removal shall be without prejudice to the
contract rights, if any, of the agent so removed. Appointment of a resident
agent shall not of itself create contract rights.
Section 12. Salaries. The salaries of the officers shall be fixed from
time to time by the board of directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
corporation.
ARTICLE VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS
-------------------------------------
Section 1. Contracts. The board of directors may authorize any officer
or officers, agent or agents, to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances.
Section 2. Loans. No loans shall be contracted on behalf of the
corporation and no evidence of indebtedness shall be issued in its name unless
authorized by a resolution of the board of directors. Such authority may be
general or confined to specific instances.
Section 3. Checks, Drafts, etc. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the corporation shall be signed by such officer or officers, agent or
agents of the corporation and in such manner as shall from time to time be
determined by the board of directors.
Section 4. Deposits. All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of the corporation
in such banks, trust companies or other depositories as the board of directors
may select.
ARTICLE VII
CERTIFICATES FOR SHARES AND THEIR TRANSFER
------------------------------------------
Section 1. Certificates for Shares. Certificates representing shares of
the corporation shall be in such form as shall be determined by the board of
directors. Such certificates shall be signed by the chief executive officer,
president or a vice president and by the secretary or an assistant secretary and
sealed with the corporate seal or a facsimile thereof. The signatures of such
officers upon a certificate may be printed or lithographed
13
<PAGE>
upon such certificate in lieu of the actual signatures if the certificate is
countersigned or otherwise authenticated by a transfer agent or transfer clerk,
and by a registrar, other than the corporation itself or one of its employees.
Each certificate for shares shall be consecutively numbered or otherwise
identified. The name and address of the person to whom the shares represented
thereby are issued, with the number of shares and date of issue, shall be
entered on the stock transfer books of the corporation. All certificates
surrendered to the corporation for transfer shall be canceled and no new
certificate shall be issued until the former certificate for a like number of
shares shall have been surrendered and canceled, except that in case of a lost,
destroyed or mutilated certificate a new one may be issued therefor upon such
terms and indemnity to the corporation as the board of directors may prescribe.
Section 2. Transfer of Shares. Transfer of shares of the corporation
shall be made only on the stock transfer books of the corporation by the holder
of record thereof or by his legal representative, who shall furnish proper
evidence of authority to transfer, or by his attorney there unto authorized by
power of attorney duly executed and filed with the secretary of the corporation,
and on surrender for cancellation of the certificate for such shares. The person
in whose name shares stand on the books of the corporation shall be deemed by
the corporation to be the owner thereof for all purposes.
ARTICLE VIII
FISCAL YEAR
-----------
The fiscal year of the corporation shall begin on the Ist day of
January and end on the 31st day of December in each year.
ARTICLE IX
CORPORATE SEAL
--------------
The board of directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the corporation
and state of incorporation and the words "Corporate Seal."
ARTICLE X
WAIVER OF NOTICE
----------------
Whenever any notice is required to be given to any stockholder or
director of the corporation under the provisions of these bylaws or under the
provisions of the Articles of Incorporation or under the provisions of the
General Corporation Law of the State of Nevada, a waiver thereof in writing
signed by the person or persons entitled to such notice, whether before or after
the time stated therein, shall be deemed equivalent to the giving of such
notice.
14
<PAGE>
ARTICLE XI
AMENDMENTS
----------
These bylaws may be altered or repealed and new bylaws may be adopted
by the board of directors, but bylaws adopted by the board of directors may be
altered or repealed, and new bylaws made by the stockholders entitled to vote
thereon.
ARTICLE XII
RECORDS
-------
Section 1. Records to be Kept at Principal Office. The corporation
shall keep and maintain at its principal office in the State of Nevada:
(a) a certified copy of its Articles of Incorporation and all
amendments thereto;
(b) a certified copy of its bylaws and all amendments thereto;
(c) a stock ledger or duplicate stock ledger, revised annually,
containing the names, alphabetically arranged, of all persons
who are stockholders of the corporation, showing their places
of residence, if known, and the number of shares held by them
respectively; or
(d) in lieu of stock ledger or duplicate stock ledger specified in
subsection (c), a statement setting out the name of the
custodian of the stock ledger or duplicate stock ledger, and
the present and complete post office address, including street
and number, if any, where such stock ledger or duplicate stock
ledger specified in this subsection is kept.
Section 2. Inspection of Records. Any person who has been a stockholder
of record of the corporation for at least six months immediately preceding his
demand, or any person holding, or there unto authorized in writing by the
holders of, at least 5% of all its outstanding shares, upon at least five days
written demand, or any judgment creditor of the corporation without prior
demand, shall have the right to inspect in person or by agent or attorney,
during usual business hours, the stock ledger or duplicate stock ledger, whether
kept in the principal office of the corporation in the State of Nevada or
elsewhere as provided in subsection (d) of Section 1, and to make extracts
therefrom. Any such inspection may be denied to such stockholder or other person
upon his refusal to furnish to the corporation an affidavit that such inspection
is not desired for a purpose which is in the interest of a business or object
other than the business of the corporation and that he has not at any time sold
or offered for sale any list of stockholders of any domestic or foreign
corporation or aided or abetted any person in procuring any such record of
stockholders for any such purpose.
15
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 112,686
<INT-BEARING-DEPOSITS> 8,998
<FED-FUNDS-SOLD> 200
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,263,313
<INVESTMENTS-CARRYING> 12,294
<INVESTMENTS-MARKET> 12,097
<LOANS> 2,800,199
<ALLOWANCE> 29,166
<TOTAL-ASSETS> 4,369,639
<DEPOSITS> 3,144,291
<SHORT-TERM> 549,965
<LIABILITIES-OTHER> 55,110
<LONG-TERM> 337,325
0
0
<COMMON> 6,587
<OTHER-SE> 267,361
<TOTAL-LIABILITIES-AND-EQUITY> 4,369,639
<INTEREST-LOAN> 57,074
<INTEREST-INVEST> 21,299
<INTEREST-OTHER> 559
<INTEREST-TOTAL> 78,932
<INTEREST-DEPOSIT> 32,401
<INTEREST-EXPENSE> 45,970
<INTEREST-INCOME-NET> 32,962
<LOAN-LOSSES> 2,390
<SECURITIES-GAINS> 703
<EXPENSE-OTHER> 29,670
<INCOME-PRETAX> 15,639
<INCOME-PRE-EXTRAORDINARY> 15,639
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,087
<EPS-BASIC> .40
<EPS-DILUTED> .40
<YIELD-ACTUAL> 3.44
<LOANS-NON> 22,321
<LOANS-PAST> 6,647
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 30,122
<ALLOWANCE-OPEN> 28,377
<CHARGE-OFFS> 2,172
<RECOVERIES> 571
<ALLOWANCE-CLOSE> 29,166
<ALLOWANCE-DOMESTIC> 24,584
<ALLOWANCE-FOREIGN> 0
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</TABLE>
Exhibit 99
NEWS RELEASE
Date: April 19, 2000
Contact: For media inquiries: For financial inquiries:
Katherine Taylor John Hecht
Investor Relations Manager Chief Financial Officer
815-961-7164 815-961-2787
AMCORE FINANCIAL, INC. REPORTS A 14.3 PERCENT INCREASE
IN EARNINGS PER SHARE FOR 1ST QUARTER 2000
RETURN ON EQUITY TOPS 15 PERCENT
ROCKFORD, IL -- AMCORE Financial, Inc. reported earnings per share of $0.40
on net income of $11.1 million and a record return on equity of 15.63 percent
for the first quarter of 2000.
"We are very pleased with our performance and the fact that we have met and
exceeded a return on equity of above 15 percent for two consecutive quarters,"
said Robert J. Meuleman, president and chief executive officer.
HIGHLIGHTS
----------
o Diluted earnings per share in the first quarter rose to $0.40, up
14.3 percent, or $0.05, from the $0.35 in the first quarter of
1999.
o Net income for the first quarter was $11.1 million, a 10.5 percent,
or $1.1 million, increase from the same period last year.
o Average loans for the first quarter were up 11.1 percent, or $276
million, from the same period last year.
o Return on equity increased to a record 15.63 percent up from 12.75
percent in the first quarter of 1999.
o Net interest margin declined four basis points to 3.44 percent from
the same period a year ago and declined eight basis points from the
fourth quarter of 1999.
o Trust and asset management fees rose 15.7 percent compared to the
first quarter of 1999.
o Operating expenses declined $134,000 or 0.4 percent compared to the
first quarter of 1999.
Page 1
<PAGE>
EARNINGS SUMMARY
----------------
Net income for the first quarter was $11.1 million, a 10.5 percent increase
from $10.0 million in the first quarter of 1999. Average earning assets rose 4.1
percent contributing to a $1.2 million increase in net interest income. The
growth is attributed to a $276 million or 11.1 percent increase in average
loans. The net interest margin declined four basis points to 3.44 percent from
the same period a year ago and declined eight basis points when compared to the
fourth quarter of 1999.
"Our margin performance held up well considering the difficult rate
environment," said Meuleman. "Asset yields held up fairly well, while funding
costs increased 18 basis points when compared to the fourth quarter of 1999,
which was slightly less than expected due to favorable deposit growth late in
the quarter."
Trust and asset management revenues increased $1.0 million, or 15.7 percent,
in the first quarter of 2000 from $6.6 million in the first quarter of 1999.
"Our trust and asset management business continues to be one of our strongest
segments as evidenced by the excellent revenue growth," said Meuleman.
Mortgage revenues were down $1.6 million or 63.6 percent for the quarter due
to lower refinancing activity.
Total operating expenses declined $134,000 from a year ago to $29.7 million.
"We're pleased our operating expenses are below last year's first quarter," said
Meuleman. "Some of the savings from our Customer Focused Organizational
Structure have been reinvested to continue the strong growth in our trust and
asset management business. This is a key business for us that is not
particularly interest rate sensitive."
Further savings are expected during the year as the final stages of the
Customer Focused Organizational Structure are centralized. Commercial operations
was one of the last areas to undergo centralization. "This was our most
sensitive area, so we wanted to make sure we phased in our markets carefully to
avoid any disruptions to our customers," said Meuleman.
Meuleman said projected staff related savings from the new organizational
structure have been on target and are expected to continue. Other benefits of
the new structure include improved balance sheet management, better pricing
disciplines and enhanced customer service. "The current interest rate
environment is masking our true efficiency gains," said Meuleman. The efficiency
ratio improved 222 basis points to 59.08 percent compared to 61.30 percent in
the first quarter of 1999.
ASSET QUALITY AND RESERVES
--------------------------
The allowance for loan losses to ending loans decreased to 1.05 percent at
March 31, 2000 from 1.11 percent at March 31, 1999. Reserve coverage of
non-performing loans improved to 127.75 percent at March 31, 2000, up from
124.50 percent at March 31, 1999. Total non-performing assets at March 31, 2000
were $25.0 million, or 0.57 percent of total assets. Net charge-offs represented
26 basis points annualized of average loans for the first quarter compared to 12
basis points in the first quarter of 1999.
During the first quarter AMCORE bought back 973,500 shares of its common
shares outstanding.
Page 2
<PAGE>
AMCORE Financial, Inc., is a financial services company headquartered in
northern Illinois with banking assets of $4.4 billion and 65 locations in
Illinois and Wisconsin. The company also has three 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.; and AMCORE Consumer Finance Company.
This news release contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 with respect to
the financial condition, results of operations, plans, objectives, future
performance and business of AMCORE. Statements that are not historical facts,
including statements about beliefs and expectations, are forward-looking
statements. These statements are based upon beliefs and assumptions of AMCORE'S
management and on information currently available to such management. The use of
the words "believe", "expect", "anticipate", "plan", "estimate", "may", "will"
or similar expressions are forward looking statements. Forward-looking
statements speak only as of the date they are made, and AMCORE undertakes no
obligation to update publicly any of them in light of new information or future
events.
Contemplated, projected, forecasted or estimated results in such
forward-looking statements involve certain inherent risks and uncertainties. A
number of factors - many of which are beyond the ability of the company to
control or predict - could cause actual results to differ materially from those
in its forward-looking statements.
These factors 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 or personnel; (VI) changes in interest rates including the effect of
prepayment; (VII) general economic and business conditions which are less
favorable than expected; (VIII) equity and fixed income market fluctuations;
(IX) unanticipated changes in industry trends; (X) unanticipated changes in
credit quality and risk factors; (XI) success in gaining regulatory approvals
when required; (XII) changes in Federal Reserve Board monetary policies; (XIII)
inability to fully realize cost savings from the new organizational structure
within the expected time frame or additional or unexpected costs are incurred;
(XIV) unexpected outcomes on existing or new litigation in which AMCORE, its
subsidiaries, officers, directors or employees are named defendants; (XV) higher
than expected costs or other difficulties associated with Year 2000 compliance
solutions; (XVI) technological changes; (XVII) changes in Generally Accepted
Accounting Principles: and (XVIII) inability of third-party vendors to perform
critical services to the company.
AMCORE common stock is listed on The NASDAQ Stock Market under the symbol
"AMFI." Further information about AMCORE Financial Inc. can be found at the
company's website at http://www.AMCORE.com.
Page 3
<PAGE>
AMCORE Financial, Inc.
CONSOLIDATED KEY FINANCIAL DATA SUMMARY
<TABLE>
<CAPTION>
(in thousands, except share data) Trailing Twelve Months Ended
Quarter Ended March 31, March 31,
----------------------------------------------------------------
Percent Percent
Financial Highlights 2000 1999 Change 2000 1999 Change
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net revenues, including security gains...... $ 47,699 $ 45,991 3.7% $ 192,304 $ 184,793 4.1%
Net interest income - FTE................... 35,238 34,294 2.8% 142,270 135,627 4.9%
Operating expenses.......................... 29,670 29,804 (0.4%) 119,370 116,704 2.3%
Net income from operations.................. 11,087 10,036 10.5% 44,461 43,518 2.2%
Net income.................................. 11,087 10,036 10.5% 41,200 43,518 (5.3%)
Basic earnings per share from operations.... 0.40 0.35 14.3% 1.59 1.50 6.0%
Basic earnings per share.................... 0.40 0.35 14.3% 1.47 1.50 (2.0%)
Diluted earnings per share from operations.. 0.40 0.35 14.3% 1.56 1.49 4.7%
Diluted earnings per share.................. 0.40 0.35 14.3% 1.45 1.49 (2.7%)
Cash dividends per share.................... 0.16 0.14 14.3% 0.58 0.56 3.6%
Book value per share........................ 10.44 11.06 (5.6%)
Quarter Ended March 31,
--------------------------------
Key Financial Ratios 2000 1999 Change
- -----------------------------------------------------------------------------
Return on average assets................. 1.03% 0.98% 0.05%
Return on average equity................. 15.63% 12.75% 2.88%
Net interest margin (FTE)................ 3.44% 3.48% (0.04%)
Efficiency Ratio (FTE) ................. 59.08% 61.30% (2.22%)
Quarter Ended March 31,
--------------------------------
Percent
Income Statement 2000 1999 Change
- -----------------------------------------------------------------------------
Interest income............................. $ 78,932 $ 72,892 8.3%
Interest expense............................ 45,970 41,109 11.8%
------------------------------
Net interest income...................... 32,962 31,783 3.7%
Provision for loan losses................... 2,390 2,226 7.4%
Non-interest income:
Trust and asset management income........ 7,622 6,587 15.7%
Service charges on deposits.............. 2,614 2,218 17.9%
Mortgage revenues........................ 941 2,584 (63.6%)
Other.................................... 2,857 2,626 8.8%
------------------------------
Total non-interest income............. 14,034 14,015 0.1%
Net security gains (losses)................. 703 193 264.2%
Operating expenses:
Personnel costs.......................... 16,213 16,725 (3.1%)
Net occupancy expense.................... 1,837 1,729 6.2%
Equipment expense........................ 2,283 2,105 8.5%
External data processing expense......... 1,592 1,601 (0.6%)
Professional fees........................ 1,008 1,131 (10.9%)
Advertising and business development..... 983 746 31.8%
Amortization of intangible assets........ 528 497 6.2%
Other.................................... 5,226 5,270 (0.8%)
Total operating expenses.............. 29,670 29,804 (0.4%)
------------------------------
Income before income taxes.................. 15,639 13,961 12.0%
Income taxes................................ 4,552 3,925 16.0%
------------------------------
Net income.................................. $ 11,087 $ 10,036 10.5%
==============================
Average shares outstanding - basic (000).... 27,477 28,475 (3.5%)
Average shares outstanding - diluted (000).. 27,832 28,924 (3.8%)
Ending shares outstanding (000)............. 27,113 28,222 (3.9%)
</TABLE>
<PAGE>
AMCORE Financial, Inc.
<TABLE>
<CAPTION>
Quarter Ended March 31,
--------------------------------------------------
(in thousands) 2000 1999
- -----------------------------------------------------------------------------------------------------------
Ending Average Yield/ Average Yield/
Balance Balance Rate Balance Rate
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets:
Taxable securities..................... $ 972,777 $ 1,008,984 6.94% $ 1,069,039 6.13%
Tax-exempt securities (FTE)............ 302,830 304,141 7.68% 338,466 7.82%
Other earning assets................... 9,198 19,066 5.62% 17,029 3.79%
Loans held for sale.................... 15,983 10,304 7.34% 32,030 5.27%
Loans, net of unearned income (FTE).... 2,784,216 2,759,002 8.34% 2,483,163 8.40%
---------------------------------------------------------------
Total Earning Assets (FTE).......... $ 4,085,004 $ 4,101,497 7.94% $ 3,939,727 7.71%
Intangible assets................... 18,175 17,914 18,754
Other non-earning assets............ 266,460 202,243 211,712
---------------------------------------------------------------
Total Assets........................ $ 4,369,639 $ 4,321,654 $ 4,170,193
===============================================================
Liabilities and Stockholders' Equity:
Interest bearing deposits.............. $ 2,756,662 $ 2,700,506 4.81% $ 2,541,968 4.53%
Non-interest bearing deposits.......... 387,629 363,600 375,278
---------------------------------------------------------------
Total Deposits...................... $ 3,144,291 $ 3,064,106 $ 2,917,246
---------------------------------------------------------------
Short-term borrowings.................. 549,965 619,732 5.95% 581,188 5.73%
Long-term borrowings................... 337,325 295,460 6.16% 318,232 5.77%
---------------------------------------------------------------
Total Interest Bearing Liabilities.. 3,643,952 3,615,698 5.11% 3,441,388 4.84%
Other liabilities................... 55,110 57,029 34,283
---------------------------------------------------------------
Total Liabilities................... $ 4,086,691 $ 4,036,327 $ 3,850,949
Stockholders' Equity................ 282,948 285,327 319,244
---------------------------------------------------------------
Total Liabilities and
Stockholders' Equity................ $ 4,369,639 $ 4,321,654 $ 4,170,193
===============================================================
---------------------------------------------------------------
Quarter Ended
---------------------------------------------------------------
March 31, Percent December 31, Percent
Asset Quality (in thousands) 2000 1999 Change 1999 Change
- -----------------------------------------------------------------------------------------------------------
Ending allowance for loan losses.......... $ 29,166 $ 27,919 4.5% 28,377 2.8%
Net charge-offs........................... 1,806 710 154.4% 3,618 (50.1%)
Net charge-offs to average loans (B)...... 0.26% 0.12% 0.14% 0.53% (0.27%)
Non-performing assets:
Non-performing loans - nonaccrual...... $ 22,830 $ 22,425 1.8% $ 18,419 23.9%
Other real estate owned (OREO)......... 2,137 2,477 (13.7%) 2,675 (20.1%)
---------------------------------------------------------------
Total non-performing assets......... $ 24,967 $ 24,902 0.3% $ 21,094 18.4%
===============================================================
Loans 90 days past due and still accruing. $ 6,714 $ 8,078 (16.9%) $ 10,197 (34.2%)
(B) On an annualized basis.
Key Asset Quality Ratios Change
- -------------------------------------------------------------------------------
Allowance to ending loans.............. 1.05% 1.11% (0.06%)
Allowance to non-performing loans...... 127.75% 124.50% 3.25%
Non-performing loans to loans.......... 0.82% 0.89% (0.07%)
Non-performing assets to loans & OREO.. 0.90% 0.99% (0.09%)
Non-performing assets to total assets.. 0.57% 0.59% (0.02%)
Capital Adequacy
- -------------------------------------------------------------------------------
Total risk-based capital................ 12.10% 12.99% (0.89%)
Tier 1 risk-based capital............... 11.13% 11.98% (0.85%)
Leverage ratio.......................... 7.72% 7.99% (0.27%)
</TABLE>
