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 September 30, 1997
Commission file number 0-13393
AMCORE FINANCIAL, INC.
NEVADA 36-3183870
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
501 Seventh Street, Rockford, Illinois 61104
Telephone number (815) 968-2241
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
The number of shares outstanding of the registrant's Common stock, par value
$.22 per share, at October 31, 1997 was 26,941,530 shares.
Index of Exhibits on Page 21 Page 1
AMCORE FINANCIAL, INC.
Form 10-Q Table of Contents
PART I PAGE NUMBER
- ------ -----------
ITEM 1 Financial Statements
Consolidated Balance Sheets as of September 30, 1997 and
December 31, 1996 . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Income for the Three and Nine
Months Ended September 30, 1997 and 1996 . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows for the Nine
Months Ended September 30, 1997 and 1996 . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . . . . 6
ITEM 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . 9
PART II
ITEM 4 Submission of Matters to a Vote of Security Holders . . . . . . 21
ITEM 6 Exhibits and Reports on Form 10-Q . . . . . . . . . . . . . . . 21
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2
AMCORE FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
(IN THOUSANDS, EXCEPT SHARE DATA) 1997 1996
===================================================================================================================
ASSETS Cash and cash equivalents............................................. $107,492 $105,347
Interest earning deposits in banks.................................... 1,709 833
Federal funds sold and other short-term investments................... 4,742 26,261
Mortgage loans held for sale.......................................... 19,355 11,730
Securities available for sale......................................... 1,563,150 1,213,957
Securities held to maturity (fair value of $ 17,083 in 1997;
$ 55,242 in 1996)................................................... 16,915 54,548
--------------------------
Total securities................................................. $1,580,065 $1,268,505
Loans and leases, net of unearned income.............................. 1,904,178 1,807,121
Allowance for loan and lease losses................................... (21,415) (19,295)
--------------------------
Net loans and leases............................................. $1,882,763 $1,787,826
Premises and equipment, net........................................... 54,469 56,567
Intangible assets, net................................................ 12,939 13,881
Other real estate owned............................................... 1,422 920
Other assets.......................................................... 60,711 60,125
--------------------------
TOTAL ASSETS..................................................... $3,725,667 $3,331,995
==========================
LIABILITIES LIABILITIES
AND Demand deposits....................................................... $857,704 $841,085
STOCKHOLDERS' Savings deposits...................................................... 175,750 192,608
EQUITY Other time deposits................................................... 1,438,954 1,317,797
--------------------------
Total deposits................................................... $2,472,408 $2,351,490
Short-term borrowings................................................. 791,953 549,081
Long-term borrowings.................................................. 131,829 131,612
Other liabilities..................................................... 48,854 42,392
--------------------------
TOTAL LIABILITIES................................................ $3,445,044 $3,074,575
--------------------------
STOCKHOLDERS' EQUITY
Preferred stock, $1 par value: authorized 10,000,000 shares;
issued none........................................................... $ - $ -
Common stock, $.22 par value: authorized 45,000,000 shares;
September 30, December 31,
1997 1996
Issued............ 27,681,153 27,627,740
Outstanding....... 26,907,805 26,706,883 6,152 6,152
Treasury.......... 773,348 920,857 (4,042) (4,908)
Additional paid-in capital............................................ 72,482 67,363
Retained earnings..................................................... 200,122 191,484
Deferred compensation non-employee directors.......................... (1,542) (715)
Net unrealized gain (loss) on securities available for sale, net
of taxes............................................................ 7,451 (1,956)
--------------------------
TOTAL STOCKHOLDERS' EQUITY....................................... $280,623 $257,420
--------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY....................... $3,725,667 $3,331,995
==========================
See accompanying notes to consolidated financial statements.
3
AMCORE FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1997 1996 1997 1996
==================================================================================================================================
INTEREST Interest and fees on loans and leases................................ $42,297 $39,178 $121,899 $112,954
INCOME Interest on securities:
Taxable............................................................. 20,659 16,562 56,312 46,136
Tax-exempt.......................................................... 4,239 4,010 12,050 11,184
-------------------- --------------------
TOTAL INCOME FROM SECURITIES...................................... $24,898 $20,572 $68,362 $57,320
-------------------- --------------------
Interest on federal funds sold and other short-term investments...... 59 266 375 1,055
Interest and fees on mortgage loans held for sale.................... 836 593 2,030 2,100
Interest on deposits in banks........................................ 40 28 71 53
-------------------- --------------------
TOTAL INTEREST INCOME............................................. $68,130 $60,637 $192,737 $173,482
-------------------- --------------------
INTEREST Interest on deposits................................................. $26,091 $23,710 $74,044 $68,801
EXPENSE Interest on short-term borrowings.................................... 11,020 7,458 28,396 18,322
Interest on long-term borrowings..................................... 2,555 2,349 6,675 7,547
-------------------- --------------------
TOTAL INTEREST EXPENSE............................................ $39,666 $33,517 $109,115 $94,670
-------------------- --------------------
NET INTEREST INCOME............................................... $28,464 $27,120 $83,622 $78,812
Provision for loan and lease losses.................................. 2,673 2,296 6,524 4,355
-------------------- --------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES..... $25,791 $24,824 $77,098 $74,457
-------------------- --------------------
Trust and asset management income.................................... $3,854 $3,541 $11,575 $10,552
NON-INTEREST Service charges on deposits.......................................... 2,011 1,880 5,942 5,736
INCOME Mortgage revenues.................................................... 1,319 1,123 3,031 3,245
Insurance revenues................................................... 570 930 1,611 1,654
Collection fee income................................................ 487 501 1,659 1,647
Gain on sale of credit card receivables.............................. - - 1,931 -
Other................................................................ 2,259 3,696 6,016 7,526
-------------------- --------------------
NON-INTEREST INCOME, EXCLUDING NET REALIZED SECURITY GAINS........ $10,500 $11,671 $31,765 $30,360
Net realized security gains.......................................... 574 352 1,588 1,372
-------------------- --------------------
TOTAL NON-INTEREST INCOME......................................... $11,074 $12,023 $33,353 $31,732
Compensation expense................................................. $11,475 $10,713 $35,417 $32,249
OPERATING Employee benefits.................................................... 2,358 2,860 8,948 9,432
EXPENSES Net occupancy expense................................................ 1,634 1,649 5,252 5,000
Equipment expense.................................................... 1,822 2,240 9,002 6,447
Professional fees.................................................... 699 725 5,029 2,253
Advertising and business development................................. 491 649 2,124 2,048
Amortization of intangible assets.................................... 560 548 1,659 1,669
Other................................................................ 5,665 5,881 17,100 15,178
-------------------- --------------------
TOTAL OPERATING EXPENSES.......................................... $24,704 $25,265 $84,531 $74,276
-------------------- --------------------
Income Before Income Taxes........................................... $12,161 $11,582 $25,920 $31,913
Income taxes......................................................... 3,114 3,257 6,603 8,930
-------------------- --------------------
NET INCOME........................................................ $9,047 $8,325 $19,317 $22,983
==================== ====================
EARNINGS PER COMMON SHARE......................................... $0.34 $0.31 $0.72 $0.86
DIVIDENDS PER COMMON SHARE........................................ 0.12 0.11 0.33 0.32
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING........................ 26,882 26,658 26,836 26,639
See accompanying notes to consolidated financial statements.
4
AMCORE FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30,
(IN THOUSANDS) 1997 1996
==============================================================================================================================
CASH FLOWS NET INCOME.............................................................................. $19,317 $22,983
FROM Adjustments to reconcile net income to net
OPERATING cash provided by operating activities:
ACTIVITIES Depreciation and amortization of premises and equipment............................ 6,027 4,539
Amortization and accretion of securities, net...................................... 1,492 2,885
Provision for loan and lease losses................................................ 6,524 4,355
Amortization of intangible assets.................................................. 1,659 1,669
Gain on sale of securities available for sale...................................... (1,688) (1,465)
Loss on sale of securities available for sale...................................... 100 93
Purchase of trading securities..................................................... - (536)
Proceeds from sale of trading securities........................................... - 536
Gain on sale of credit card receivables............................................ (1,931) -
Gain on sale of merchant bankcard processing....................................... - (1,400)
Write-down of other real estate owned.............................................. 83 -
Deferred compensation expense...................................................... 241 (20)
Deferred income taxes.............................................................. (2,239) 2,351
Originations of mortgage loans held for sale....................................... (148,957) (153,617)
Proceeds from sales of mortgage loans held for sale................................ 141,332 159,960
Other, net......................................................................... 2,380 918
--------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES....................................... $24,340 $43,249
--------------------
CASH FLOWS
FROM Proceeds from maturities of securities available for sale............................... $144,897 $155,629
INVESTING Proceeds from maturities of securities held to maturity................................. 8,262 3,380
ACTIVITIES Proceeds from sales of securities available for sale.................................... 213,326 151,615
Purchase of securities held to maturity................................................. (14,197) (11,450)
Purchase of securities available for sale............................................... (646,835) (600,300)
Net decrease (increase) in federal funds sold and other short-term investments.......... 20,289 (47,745)
Net increase in interest earning deposits in banks...................................... (876) (663)
Proceeds from the sale of consumer finance loans and leases............................. 1,798 2,044
Proceeds from the sale of credit card receivables....................................... 15,457 -
Proceeds from the sale of merchant bankcard processing.................................. - 1,400
Loans made to customers and principal collection of loans, net.......................... (118,246) (171,927)
Proceeds from the sale of premises and equipment........................................ 97 1,947
Purchases of premises and equipment..................................................... (4,318) (4,123)
--------------------
NET CASH REQUIRED FOR INVESTING ACTIVITIES...................................... ($380,346) ($520,193)
--------------------
CASH FLOWS
FROM Net (decrease) increase in demand deposits and savings accounts......................... ($239) $56,055
FINANCING Net increase in time deposits........................................................... 121,157 127,298
ACTIVITIES Net increase in short-term borrowings................................................... 198,619 235,060
Proceeds from long-term borrowings...................................................... 59,571 75,500
Payment of long-term borrowings......................................................... (15,210) (5,139)
Dividends paid.......................................................................... (8,896) (7,106)
Issuance of common stock for employee incentive plans................................... 429 207
Issuance of treasury stock for employee incentive plans................................. 2,720 708
--------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES....................................... $358,151 $482,583
--------------------
Net change in cash and cash equivalents................................................. $2,145 $5,639
--------------------
Cash and cash equivalents:
Beginning of year..................................................................... 105,347 121,966
--------------------
End of period......................................................................... $107,492 $127,605
====================
SUPPLEMENTAL
DISCLOSURES OF Cash payments for:
CASH FLOW Interest paid to depositors........................................................... $73,699 $66,593
INFORMATION Interest paid on borrowings........................................................... 32,986 23,116
Income taxes paid..................................................................... 8,503 8,637
NON-CASH
ACTIVITIES Other real estate acquired in settlement of loans....................................... 1,420 665
Transfer of held to maturity securities to available for sale........................... 31,018 -
See accompanying notes to consolidated financial statements.
5
ITEM 1 - FINANCIAL STATEMENTS (continued)
AMCORE FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial reporting and with instructions for Form 10-Q and Rule 10-01
of Regulation S-X. Accordingly, these financial statements do not include all
the information and footnotes required by generally accepted accounting
principles. These financial statements include, however, all adjustments
(consisting of normal recurring accruals), which in the opinion of management,
are considered necessary for the fair presentation of the results of
operations for the periods shown.
The consolidated financial statements and the financial information have been
restated to reflect the mergers with First National Bancorp, Inc. ("FNB"), on
April 18, 1997, and Country Bank Shares Corporation ("CBSC"), on July 16,
1997, which were accounted for using the pooling of interests method.
Operating results for the three and nine month periods ended September 30,
1997 are not necessarily indicative of the results that may be expected for
the fiscal year ending December 31, 1997. For further information, refer to
the consolidated financial statements and footnotes thereto included in the
Form 10-K Annual Report of AMCORE Financial, Inc. and Subsidiaries (the
"Company") for the year ended December 31, 1996.
NOTE 2 - EARNINGS PER SHARE
Earnings per share is based on dividing net income by the weighted average
number of shares of common stock outstanding during the periods, adjusted for
common stock equivalents. Common stock equivalents consist of shares issuable
under options granted pursuant to stock plans. The fully-dilutive effect of
common stock equivalents on earnings per share was less than three percent for
all periods presented (see Note 5). Share data for all prior year periods
presented have been restated to reflect the mergers with FNB and CBSC and the
three-for-two stock split on September 17, 1997.
6
NOTE 3 - SECURITIES
A summary of securities at September 30, 1997 and December 31, 1996 were as
follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------------------------------------------
(in thousands)
At September 30, 1997
Securities Available for Sale:
U.S. Treasury $114,461 $687 ($161) $114,987
U.S. Government agencies 277,999 880 (1,724) 277,155
Mortgage-backed securities 311,181 7,718 (303) 318,596
State and political subdivisions 784,601 6,778 (1,564) 789,815
Corporate obligations and other 62,461 243 (107) 62,597
--------------------------------------------
Total Securities Available for Sale $1,550,703 $16,306 ($3,859) $1,563,150
============================================
Securities Held to Maturity:
U.S. Treasury $11,922 $107 ($27) $12,002
State and political subdivisions 4,960 92 (4) 5,048
Corporate obligations and other 33 - - 33
--------------------------------------------
Total Securities Held to Maturity $16,915 $199 ($31) $17,083
--------------------------------------------
Total Securities $1,567,618 $16,505 ($3,890) $1,580,233
============================================
At December 31, 1996
Securities Available for Sale:
U.S. Treasury $132,377 $650 ($544) $132,483
U.S. Government agencies 165,557 216 (3,855) 161,918
Mortgage-backed securities 553,472 2,659 (5,203) 550,928
State and political subdivisions 263,341 4,545 (1,330) 266,556
Corporate obligations and other 102,504 223 (655) 102,072
--------------------------------------------
Total Securities Available for Sale $1,217,251 $8,293 ($11,587) $1,213,957
============================================
Securities Held to Maturity:
U.S. Treasury $1,647 $5 ($4) $1,648
U.S. Government agencies 5,684 61 - 5,745
State and political subdivisions 11,413 103 (115) 11,401
Mortgage-backed securities 31,587 703 (86) 32,204
Corporate obligations and other 4,217 27 - 4,244
--------------------------------------------
Total Securities Held to Maturity $54,548 $899 ($205) $55,242
--------------------------------------------
Total Securities $1,271,799 $9,192 ($11,792) $1,269,199
============================================
Upon completion of the merger of First National Bancorp, Inc. ("FNB") of
Monroe, Wisconsin on April 18, 1997, approximately $31,018,000 of FNB's held
to maturity securities were transferred to available-for-sale as permitted by
FAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" in order to make the portfolio consistent with AMCORE's investment
objectives.
7
NOTE 4 - LONG-TERM BORROWINGS
On March 25, 1997, the Company issued $40 million of capital securities
through AMCORE Capital Trust I ("Trust"), a statutory business trust. All of
the common securities are owned by the Company. The capital securities pay
cumulative cash distributions semiannually at an annual rate of 9.35%. The
securities are redeemable from March 25, 2007 until March 25, 2017 at a
declining rate of 104.6750% to 100.0% of the principal amount. After March 25,
2017, they are redeemable at par until June 15, 2027 when redemption is
mandatory. Prior redemption is permitted under certain circumstances, such as
changes in tax or regulatory capital rules. The proceeds of the capital
securities were invested by the Trust in junior subordinated debentures which
represents all of the assets of the Trust. The Company fully and
unconditionally guarantees the capital securities through the combined
operation of the debentures and other related documents. The Company's
obligations under the guarantee are unsecured and subordinate to senior and
subordinated indebtedness of the Company.
Several of the Company's subsidiary banks borrow from the Federal Home Loan
Bank (FHLB) in connection with the purchase of mortgage-backed securities for
the investment leveraging program. The current balance of these borrowings is
$152,035,000 with an average maturity of 2.4 years, and a weighted average
borrowing rate of 5.94%.
Scheduled reductions of long-term borrowings are as follows:
====================================================================
(in thousands) Total
- --------------------------------------------------------------------
1997 . . . . . . . . . . . . . . . . . . . . $45,481
1998 . . . . . . . . . . . . . . . . . . . . 41,993
1999 . . . . . . . . . . . . . . . . . . . . 26,669
2000 . . . . . . . . . . . . . . . . . . . . 30,448
2001 . . . . . . . . . . . . . . . . . . . . 498
Thereafter . . . . . . . . . . . . . . . . . 48,840
- --------------------------------------------------------------------
Sub-Total . . . . . . . . . . . . . . . $193,929
Less current portion of FHLB borrowings . . . (62,100)
- --------------------------------------------------------------------
Total Long-Term Borrowings . . . . . . . $131,829
====================================================================
Other long-term borrowings include a non-interest bearing note from the
January 1993 acquisition of a local collection agency. The note requires
annual payments of $444,000 through 2002. The note was discounted at an
interest rate of 8.0%
NOTE 5 - NEW ACCOUNTING STANDARD
The Financial Accounting Standards Board has recently issued FAS No. 128
"Earning per Share". This statement requires the presentation of basic
earning per share (EPS) and diluted EPS for all income statement periods
presented in the financial statements. Basic EPS is computed by dividing
income available to common shareholders by the weighted average shares
outstanding. Diluted EPS is computed similar to basic EPS except the
denominator is increased to include the number of additional shares that could
be outstanding if potential dilutive shares were issued.
Previous accounting standards did not require presentation of diluted EPS if
the dilution was less than three percent. The dilutive effect of AMCORE's
option program has been less than three percent and accordingly not presented
on the financial statements. The earnings per share presentation as required
by FAS 128 would be as follows:
Quarter Ended Sept 30, Year-to-Date Ended Sept 30,
---------------------- ---------------------------
1997 1996 1997 1996
---- ---- ---- ----
Basic earnings per share $0.34 $0.31 $0.72 $0.86
Diluted earnings per share $0.33 $0.31 $0.71 $0.85
8
AMCORE FINANCIAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's discussion and analysis focuses on the significant factors which
affected AMCORE Financial, Inc. and subsidiaries ("AMCORE") Consolidated
Balance Sheet as of September 30, 1997 as compared to December 31, 1996 and
the results of operations for the three and nine months ended September 30,
1997 as compared to the same periods in 1996. This discussion is intended to
be read in conjunction with the consolidated financial statements and notes
thereto appearing elsewhere in this report. All financial statements and
information have been restated to reflect the April 18, 1997 merger with First
National Bancorp, Inc. ("FNB") of Monroe, Wisconsin, the July 16, 1997 merger
with Country Bank Shares Corporation ("CBSC") and the September 17, 1997
three-for-two stock split.
This 10-Q contains and incorporates by reference certain forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995 with respect to the results of operations and businesses of AMCORE.
These forward-looking statements involve certain risks and uncertainties.
Factors that may cause actual results to differ materially from those
contemplated, projected, forecasted or estimated in such forward-looking
statements include, among others, the following possibilities: (i)
heightened competition, including specifically the intensification of price
competition, the entry of new competitors and the formation of new products by
new and existing competitors; (ii) adverse state and federal legislation and
regulation; (iii) failure to obtain new customers or retain existing
customers; (iv) inability to carry out marketing and/or expansion plans; (v)
loss of key executives; (vi) changes in interest rates; (vii) general economic
and business conditions which are less favorable than expected; (viii)
unanticipated changes in industry trends; and (ix) changes in Federal Reserve
Board Monetary policies.
OVERVIEW OF OPERATIONS
AMCORE reported net income of $9.0 million for the three months ended
September 30, 1997, an increase of 8.7% from the $8.3 million in the
comparable quarter in 1996. Earnings per share for the third quarter of 1997
were $.34 versus $.31 in the same quarter of 1996, an increase of 9.7%. The
primary factors contributing to the third quarter improvement in earnings were
growth in average earning assets and lower non-interest expense. These
factors were partially offset by a decline in non-interest income which was
attributable to the gain on the sale of merchant card processing during the
third quarter of 1996.
Net income for the nine months ended September 30, 1997 was $19.3 million, a
decline of 16.0% from the $23.0 million reported during the comparable quarter
in 1996. This decline of $3.7 million is attributable to $6.4 million of
after tax charges related to the Wisconsin bank mergers and the outsourcing of
core bank data processing. Excluding these charges, net income for the first
nine months of 1997 would have been $25.8 million, an increase of 12.1 %.
Earnings per share for the nine months ending September 30 were $.72 and $.86
for 1997 and 1996, respectively. Excluding the previously mentioned charges,
earnings per share for the first nine months of 1997 would have been $.96, an
increase of 11.6% when compared to the same period in 1996.
9
On April 18, 1997, AMCORE entered the interstate banking arena upon completing
its merger with FNB located in Monroe, Wisconsin. AMCORE issued 2,822,286
shares of common stock to the FNB shareholders to effect the merger. FNB has
approximately $236 million of assets and five locations. The transaction was
accounted for as a pooling of interests. Merger related charges of $1.4
million after-tax were recorded at closing related primarily to data
processing integration, legal, accounting and investment banking fees.
On July 16, 1997, AMCORE expanded its presence in Wisconsin with the
completion of the merger with CBSC, Mt. Horeb, Wisconsin. AMCORE issued
2,469,417 shares of common stock to Country shareholders. The transaction was
accounted for as a pooling of interests. Merger expenses of $2.5 million
after-tax were recorded related to the closing of a duplicate facility in
Belleville, Wisconsin, data processing integration expenses, legal, accounting
and investment banking fees.
During August of 1997, AMCORE signed an outsourcing agreement with ALLTEL,
Little Rock, Arkansas for its core bank data processing. The anticipated
benefits of outsourcing mainframe data processing include year 2000 compliant
systems, a standardized platform, current software release and technology, and
an ability to assimilate acquisitions more quickly and less expensively.
AMCORE recorded a $2.6 million after tax charge related to write-offs of
obsolete software and equipment, severance for staff reductions and conversion
costs. AMCORE anticipates modest cost reductions initially with future costs
dependent on volume. More importantly, the arrangement addresses the year
2000 and mainframe operating systems upgrade which had potential significant
expenditures related to them. AMCORE is reviewing other potential costs
related to year 2000 including P.C.'s, P.C. software and ATM's. Current
estimates indicate these costs will not have a material impact on future
performance.
On September 17, 1997, AMCORE completed a three-for-two stock split to
shareholders of record on September 5, 1997. This split increased the
shares outstanding from 17,938,536 to 26,907,805.
On September 30, 1997, AMCORE signed a definitive agreement to acquire
Investors Management Group, LTD ("IMG") of Des Moines, Iowa. IMG is Iowa's
largest independent asset management firm with more than $1.7 billion of
assets under management. IMG's expertise in fixed income securities will
complement AMCORE's award winning Vintage family of mutual funds to bring
total assets under management to over $3.5 billion. The transaction, which is
expected to close in early 1998, will be a stock exchange accounted for using
the purchase method of accounting.
On November 11, 1997, AMCORE signed a definitive agreement to merge with
Midwest Federal Financial Corp. of Baraboo, WI ("Midwest"). Midwest has total
assets of $212 million and nine offices. This merger is a stock for stock
exchange to be accounted for as pooling of interests. The merger, subject to
customary conditions to close, including regulatory approval to close, is
anticipated to occur in the second quarter of 1998. Upon completion of this
merger, AMCORE will have 22 offices and total assets of approximately $750
million in Wisconsin.
AMCORE continues to be "well capitalized" as defined by regulatory guidelines.
At September 30, 1997, the company's total capital to risk weighted assets was
14.59%.
10
EARNINGS ANALYSIS
The analysis below discusses by major components the changes in net income
when comparing the three and nine month periods ended September 30, 1997 and
1996.
NET INTEREST INCOME
Net interest income is the difference between income earned on interest
earning assets and the interest expense incurred on interest bearing
liabilities. The interest income on certain loans and municipal securities is
not subject to federal income tax. For analytical purposes, the interest
income and rates on these types of assets are adjusted to a "fully taxable
equivalent" basis. The fully taxable equivalent adjustment was calculated
using the statutory federal income tax rate of 35%. Adjusted interest income
is as follows (in thousands):
For the Three Months For the Nine Months
Ended September 30 Ended September 30
------------------------------------------
1997 1996 1997 1996
==========================================
Interest Income Book Basis $68,130 $60,637 $192,737 $173,482
Taxable Equivalent Adjustment 2,392 2,188 6,807 6,265
--------------------------------------
Interest Income Taxable Equivalent Basis 70,522 62,825 199,544 179,747
Interest Expense 39,666 33,517 109,115 94,670
--------------------------------------
Net Interest Income Taxable Equivalent Basis $30,856 $29,308 $90,429 $85,077
======================================
Net interest income on a fully taxable equivalent basis increased $1.3 million
or 4.6% during the third quarter of 1997 over the same period in 1996. The
improvement in net interest income results mainly from a 11.9% increase in
average earning assets which was partially offset by a narrowing of the
interest rate spread.
The growth in average earning assets can be attributed to loan growth and
increased levels of investment securities related to the investment leveraging
program. Average loans increased $146.9 million or 8.4% when comparing the
third quarters of 1997 and 1996. The investment leveraging program increased
approximately $259.6 million on average. This program, which earns a narrower
spread, utilizes excess capital to improve return on equity. The program
contributed approximately $2.8 million to net interest income during the third
quarter of 1997, an increase of $1.1 million when compared to the same period
in 1996. The program is funded primarily through the use of repurchase
agreements, callable brokered CD's and Federal Home Loan Bank borrowings. The
proceeds of these borrowings are invested principally in mortgage-backed and
U.S. government agency securities. Additionally, off-balance sheet swaps are
used to reduce the interest rate risk related to 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 total stockholders'
equity, the effective rate paid for all funding sources is lower than the rate
paid on interest-bearing liabilities alone.
11
As the table below indicates, the interest rate spread decreased 28 basis
points to 2.97% in the third quarter of 1997 when compared to the 3.25% during
the same period in 1996. The net interest margin was 3.58% during the third
quarter of 1997, a decrease of 24 basis points from the comparable period in
1996. The interest rate spread on the investment securities included in the
investment leveraging program was 151 and 141 basis points for the quarters
ended September 30, 1997 and 1996, respectively. The interest rate spread on
all other earning assets was 3.39% and 3.60% during the comparable periods.
As a result, the effect of the leveraging program accounted for 13 basis
points of the decline in the interest rate margin during these periods.
The net interest margin spread and interest rate margin were 3.03% and 3.66%
for the first nine months of 1997, respectively. These represent a decrease
of 22 and 18 basis points when compared to the same period in 1996.
12
Three Months Ended Three Months Ended
September 30, 1997 September 30, 1996
--------------------------------- ---------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
------- -------- ------- ------- -------- -------
Assets
- ------
Interest-Earning Assets:
Taxable Securities $1,189,299 $20,658 6.94% $995,135 $16,562 6.65%
Tax-exempt securities (1) 323,649 6,522 8.06% 295,910 6,169 8.34%
-------------------------------------------------------------------------
Total Securities (2) 1,512,948 27,180 7.18% 1,291,045 22,731 7.04%
Mortgage loans held for sale (3) 13,538 238 7.03% 8,748 183 8.37%
Loans (1) (4) 1,897,633 42,407 8.82% 1,750,766 39,207 8.84%
Other earning assets 9,632 99 4.02% 16,739 294 6.87%
Fees on mortgage loans held for sale (3) - 598 - - 410 -
---------- ------- ----- ---------- ------- -----
Total Interest-Earning Assets $3,433,751 $70,522 8.15% $3,067,298 $62,825 8.12%
Noninterest-Earning Assets:
Cash and Due from Banks 88,550 97,344
Other Assets 130,827 112,527
Allowance for Loan Losses (20,411) (18,153)
---------- ----------
Total Assets $3,632,717 $3,259,016
========== ==========
Liabilities and Stockholders' Equity
- ------------------------------------
Interest-Bearing Liabilities:
Interest-bearing demand and savings
deposits $733,551 $5,283 2.86% 715,218 $4,605 2.56%
Time Deposits 1,402,317 20,808 5.89% 1,301,547 19,105 5.84%
---------- ------- ----- --------- ------ -----
Total interest-bearing deposits 2,135,868 26,091 4.85% 2,016,765 23,710 4.66%
Short-Term Borrowings 755,351 11,020 5.72% 523,696 7,458 5.59%
Long-Term Debt 139,420 2,555 7.27% 165,684 2,349 5.64%
---------- ------- ----- --------- ------ -----
Total Interest-Bearing Liabilities $3,030,639 $39,666 5.18% 2,706,145 $33,517 4.90%
Noninterest-Bearing Liabilities:
Demand Deposits 285,716 279,648
Other Liabilities (3) 43,541 36,398
---------- ---------
Total Liabilities $3,359,896 $3,022,191
Stockholders' Equity (3) 272,821 236,825
---------- ---------
Total Liabilities and
Stockholders' Equity $3,632,717 $3,259,016
========== =========
Net Interest Income $30,856 $29,308
======= =======
Net Interest Spread 2.97% 3.22%
===== =====
Interest Rate Margin 3.58% 3.80%
===== =====
Notes:
(1) The interest on tax-exempt investment securities and
tax-exempt loans is calculated on a tax equivalent basis
assuming a federal tax rate of 35%.
(2) The average balance has been adjusted to exclude the effect
of Statement of Financial Accounting Standards No. 115.
(3) The yield-related fees recognized from the origination of
mortgage loans held for sale are in addition to the
interest earned on the loans during the period in which
they are warehoused for sale as shown above.
(4) The balances of nonaccrual loans are included in average
loans outstanding. Interest on loans includes yield
related loan fees.
13
Nine Months Ended Nine Months Ended
September 30, 1997 September 30, 1996
--------------------------------- ---------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
------- -------- ------- ------- -------- -------
Assets
- ------
Interest-Earning Assets:
Taxable Securities $1,099,477 $56,312 6.83% $947,275 $46,136 6.49%
Tax-exempt securities (1) 307,335 18,538 8.04% 276,717 17,206 8.29%
-------------------------------------------------------------------------
Total Securities (2) 1,406,812 74,850 7.10% 1,223,992 63,342 6.90%
Mortgage loans held for sale (3) 11,125 586 7.02% 10,209 621 8.11%
Loans (1) (4) 1,843,032 122,218 8.80% 1,682,582 113,198 8.90%
Other earning assets 11,217 446 5.24% 19,031 1,107 7.64%
Fees on mortgage loans held for sale (3) - 1,444 - - 1,479 -
---------- -------- ----- ---------- -------- -----
Total Interest-Earning Assets $3,272,186 $199,544 8.11% $2,935,814 $179,747 8.12%
Noninterest-Earning Assets:
Cash and Due from Banks 87,901 96,160
Other Assets 120,740 120,146
Allowance for Loan Losses (19,975) (17,614)
---------- ----------
Total Assets $3,460,852 $3,134,506
========== ==========
Liabilities and Stockholders' Equity
Interest-Bearing Liabilities:
Interest-bearing demand and savings deposits $724,260 $14,790 2.73% 717,153 $13,660 2.54%
Time Deposits 1,350,422 59,254 5.87% 1,257,056 55,141 5.86%
Total interest-bearing deposits 2,074,682 74,044 4.77% 1,974,209 68,801 4.64%
Short-Term Borrowings 658,692 28,396 5.70% 445,258 18,322 5.42%
Long-Term Debt 131,704 6,675 6.78% 162,382 7,547 6.21%
---------- -------- ----- ---------- -------- -----
Total Interest-Bearing Liabilities $2,865,078 $109,115 5.08% 2,581,849 $94,670 4.87%
Noninterest-Bearing Liabilities:
Demand Deposits 291,190 277,177
Other Liabilities (3) 40,805 35,329
---------- ----------
Total Liabilities $3,197,073 $2,894,355
Stockholders' Equity (3) 263,779 240,151
---------- ----------
Total Liabilities and
Stockholders' Equity $3,460,852 $3,134,506
========== ==========
Net Interest Income $90,429 $85,077
======= =======
Net Interest Spread 3.03% 3.25%
===== =====
Interest Rate Margin 3.66% 3.84%
===== =====
Notes:
(1) The interest on tax-exempt investment securities and
tax-exempt loans is calculated on a tax equivalent basis
assuming a federal tax rate of 35%.
(2) The average balance has been adjusted to exclude the effect
of Statement of Financial Accounting Standards No. 115.
(3) The yield-related fees recognized from the origination of
mortgage loans held for sale are in addition to the
interest earned on the loans during the period in which
they are warehoused for sale as shown above.
(4) The balances of nonaccrual loans are included in average
loans outstanding. Interest on loans includes yield
related loan fees.
14
The level of net interest income is the result of the relationship between
total volume and mix of interest- earning assets and the rates earned, and the
total volume and mix of interest-bearing liabilities and the rates paid. The
rate and volume components associated with interest-earning assets and
interest-bearing liabilities are segregated in the table above to analyze the
changes in net interest income. Because of changes in the mix of the
components of interest-earning assets and interest-bearing liabilities, the
computations for each of the components do not equal the calculation for
interest-earning assets as a total and interest-bearing liabilities as a
total. The table below presents an analysis of the changes in net interest
income.
For Three Months Ended
September 30, 1997 / September 30, 1996
(in thousands)
------------------------------------------------------------
Increase (Decrease) Due to Change in Total Net
Average Volume Average Rate Increase (Decrease)
------------------------------------------------------------
Interest Income:
Taxable Securities $3,447 $649 $4,096
Tax-Exempt Securities (1) 564 (211) 353
---------------------------------------------
Total Securities (2) 4,011 438 4,449
Mortgage Loans Held for Sale 88 (33) 55
Loans (1) (4) 3,162 38 3,200
Other Earning Assets (99) (96) (195)
Fees on Mortgage Loans Held for Sale (3) 206 (18) 188
---------------------------------------------
Total Interest-Earning Assets $7,629 $68 $7,697
=============================================
Interest Expense:
Interest-Bearing Demand & Savings Deposits $121 $557 $678
Time Deposits 1,494 209 1,703
---------------------------------------------
Total Interest-Bearing Deposits 1,453 928 2,381
Short-Term Borrowings 3,375 187 3,562
Long-Term Debt (411) 617 206
---------------------------------------------
Total Interest-Bearing Liabilities $4,417 $1,732 $6,149
=============================================
Net Interest Margin / Net Interest Income (FTE) $3,212 ($1,664) $1,548
=============================================
The above table shows the changes in interest income (tax equivalent) and
interest expense attributable to volume and rate variances. The change in
interest income (tax equivalent) due to both volume and rate has been
allocated to volume and rate changes in proportion to the relationship of the
absolute dollar amounts of the change in each.
1. The interest on tax-exempt investment securities and tax-exempt loans is
calculated on a tax equivalent basis assuming a federal tax rate of 35%.
2. The average balance has been adjusted to exclude the effect of Statement of
Financial Accounting Standards No. 115.
3. The yield-related fees recognized from the origination of mortgage loans
held for sale are in addition to the interest earned on the loans during
the period in which they are warehoused for sale as shown above.
4. The balances of non-accrual loans are included in average loans
outstanding. Interest on loans includes yield- related loan fees.
The change in net interest income due to change in average volume when
comparing the third quarter of 1997 and 1996 results from the growth of
average earning assets of $366.5 million or 11.9%.
The decrease in net interest income attributable to rate between the third
quarter of 1997 and 1996 is due to the rate on interest bearing liabilities
increasing 28 basis points while the yield on earning assets did not change.
The increase in the rate paid on interest bearing liabilities is partially a
result of the increase in the rate paid on long-term debt related to the
issuance of $40 million of capital securities at a rate of 9.35% on March 25,
1997.
15
For Nine Months Ended
September 30, 1997 / September 30, 1996
(in thousands)
------------------------------------------------------------
Increase (Decrease) Due to Change in Total Net
Average Volume Average Rate Increase (Decrease)
------------------------------------------------------------
Interest Income:
Taxable Securities $8,162 $2,014 $10,176
Tax-Exempt Securities (1) 1,859 (527) 1,332
-----------------------------------------------
Total Securities (2) 10,021 1,487 11,508
Mortgage Loans Held for Sale 53 (88) (35)
Loans (1) (4) 10,722 (1,702) 9,020
Other Earning Assets (372) (289) (661)
Fees on Mortgage Loans Held for Sale (3) 22 (57) (35)
-----------------------------------------------
Total Interest-Earning Assets $20,679 ($882) $19,797
===============================================
Interest Expense:
Interest-Bearing Demand & Savings Deposits $136 $994 $1,130
Time Deposits 4,097 16 4,113
-----------------------------------------------
Total Interest-Bearing Deposits 3,600 1,643 5,243
Short-Term Borrowings 9,159 915 10,074
Long-Term Debt (1,513) 641 (872)
-----------------------------------------------
Total Interest-Bearing Liabilities $11,246 $3,199 $14,445
===============================================
Net Interest Margin / Net Interest Income (FTE) $9,433 ($4,081) $5,352
===============================================
The above table shows the changes in interest income (tax equivalent) and
interest expense attributable to volume and rate variances. The change in
interest income (tax equivalent) due to both volume and rate has been
allocated to volume and rate changes in proportion to the relationship of the
absolute dollar amounts of the change in each.
1. The interest on tax-exempt investment securities and tax-exempt loans is
calculated on a tax equivalent basis assuming a federal tax rate of 35%.
2. The average balance has been adjusted to exclude the effect of Statement of
Financial Accounting Standards No. 115.
3. The yield-related fees recognized from the origination of mortgage loans
held for sale are in addition to the interest earned on the loans during
the period in which they are warehoused for sale as shown above.
4. The balances of non-accrual loans are included in average loans
outstanding. Interest on loans includes yield- related loan fees.
The change in net interest income due to change in average volume during the
first nine months of 1997 is due to average earning assets increasing 11.5%.
The growth in earning assets is due to a $182.8 million increase in average
investment securities and a $160.5 million increase in average loans. This
growth was funded primarily by a $213.4 million increase in short-term
borrowed funds and $100.5 million in time deposits.
The decrease in net interest income attributable to rate during the first nine
months of 1997 due to changes in average rate is a result of yield on earning
assets declining one basis point while the rate paid on interest bearing
liabilities increased 21 basis points. The decrease in the yield on earning
assets is due to the rate on average loans declining 10 basis points. The
rate paid on interest bearing liabilities increased as higher rate short-term
borrowed funds grew 47.9% and were the primary source used to fund earning
asset growth.
PROVISION FOR LOAN AND LEASE LOSSES
The provision for loan and lease losses was $2.7 million and $6.5 million for
the three and nine month periods ended September 30, 1997, respectively. This
represents an increase of $377,000 or 16.4% and $2.2 million or 49.8% over the
comparable 1996 periods. The year-to-date increase in provisions relates
mainly to $2.0 million of charge-offs of satellite receivables at the Consumer
Finance subsidiary. Net charge-offs of satellite receivables
16
were $512,000 in the third quarter of 1997 a decline from the $1.0 million in
the second quarter. AMCORE has engaged a consultant to determine the
marketability of the satellite receivables into the secondary market.
Annualized net charge-offs as a percent of average loans were .30% for the
third quarter of 1997 and .32% for the nine month period compared to .22% and
.17% for the comparable 1996 periods. Excluding the charge-offs related to
the satellite receivables, the banking subsidiaries' annualized net
charge-offs as a percent of average loans would have been less than .20% for
both periods.
The reserve for loan losses as a percent of total loans was 1.12% and 1.07% at
September 30, 1997 and December 31, 1996, respectively.
NON-INTEREST INCOME
Total non-interest income in the third quarter was $11.1 million, a decrease
of $949,000 from the same period in 1996. This decline relates to the $1.4
million gain on the sale of merchant card processing included in other income
in the third quarter of 1996. On a year-to-date basis, the increase in
non-interest income is $1.6 million or 5.1%. The first quarter of 1997
included a $1.9 million gain on the sale of most of the company's credit card
receivables and a $742,000 reduction in mortgage revenue resulting from the
write down of mortgage servicing rights as required by FAS No. 125 "Accounting
for Transfers and Servicing of Financial Assets and Extinguishments in
Liabilities" which was effective January 1, 1997.
Trust and asset management income, the largest component of non-interest
income, increased 8.8% and 9.7% for the three and nine month periods ended
September 30, 1997 when compared to the same periods in 1996. This increase
is partially attributable to mutual fund assets in the Vintage Family of Funds
increasing to $853 million or 42.7% from September 30, 1996. The Vintage
Equity Fund has recently received its fourth consecutive five-star rating from
Morningstar.
Mortgage revenues increased $196,000 or 17.5% during the third quarter of 1997
as a result of increased origination market share and higher servicing
revenues. The mortgage servicing portfolio as of September 30, 1997 was $938
million. On a year-to-date basis, mortgage revenues, excluding the previously
mentioned write down of mortgage servicing rights, increased $528,000, or
16.3%.
Insurance revenues declined $360,000 in the third quarter of 1997 primarily as
a result of a change in reporting method during 1996.
OPERATING EXPENSES
Operating expenses were $24.7 million during the third quarter, a decline of
$561,000 or 2.2%. This decline was primarily due to reduced employee
benefits, mainly profit sharing expense, and equipment expenses as a result of
core bank data processing outsourcing. The efficiency ratio for the third
quarter of 1997 was 58.92%, which represents the first time AMCORE's
efficiency ratio has been below 60.00%.
17
Operating expenses increased $10.3 million or 13.8% during the first nine
months of 1997 when compared to the similar period in 1996. The second
quarter of 1997 included $4.9 million of pre-tax merger charges and a $4.3
million pre-tax core bank data processing outsourcing charge, as discussed
previously. Without these charges, operating expenses would have increased
$1.3 million or 1.8%.
INCOME TAXES
Income tax expense for the third quarter of 1997 decreased $143,000 million or
4.4%, as a result of increased tax exempt income at both the state and federal
levels. The effective tax rate for the third quarter was 25.61% compared to
28.12% in the third quarter of 1996. For the nine months ended September 30,
1997 income taxes decreased $2.3 million or 26.1% primarily as a result of
lower income before tax due to the previously mentioned second quarter merger
and core bank data processing charges.
BALANCE SHEET REVIEW
Total assets were $3.7 billion at September 30, 1997, an increase of $393.6
million or 11.8%, from December 31, 1996. Investment securities and
short-term borrowings increased $311.6 million and $242.9 million,
respectively, due to an increase in the investment leveraging program
discussed previously.
Total loans increased $97.1 million or 7.1% annualized from December 31, 1996
despite the sale of approximately $17.4 million of credit card and student
loan receivables in the first quarter. Total deposits grew at an annualized
rate of 6.9% between December 31, 1996 and September 30, 1997. Approximately
72.5% of the increase were in brokered CD's, which were $207.4 million at
September 30, 1997.
As previously mentioned, AMCORE issued $40 million of capital trust securities
on March 25, 1997. The proceeds from these securities were used to repay in
full the term debt of the parent company totaling $17.7 million. The
remaining proceeds was used to pay off the debt of merged companies totaling
$7.8 million and general corporate purposes.
ASSET QUALITY REVIEW
ALLOWANCE FOR LOAN AND LEASE LOSSES
The allowance for loan and lease losses was $21.4 million at September 30,
1997, an increase of $2.1 million from December 31, 1996. The allowance
represented 1.12% of total loans and 110.84% of non- performing loans at
September 30, 1997. The comparable ratios were 1.07% and 156.7% at December
31, 1996.
18
Net charge-offs were $1.4 million during the third quarter of 1997 versus
$955,000 for the same quarter of 1996. The increase relates primarily to
$512,000 million of charge-offs at the Consumer Finance subsidiary related to
satellite receivables. AMCORE anticipates the level of charge-offs related to
satellite receivables will remain relatively stable in future quarters.
An analysis of the allowance for loan and lease losses as of September 30,
1997 and 1996 is presented below:
For the Three Months For the Nine Months
Ended September 30 Ended September 30
------------------------------------------------
1997 1996 1997 1996
================================================
Balance at beginning of period $20,173 $17,995 $19,295 $17,107
Charge-Offs:
Commercial loans & leases 412 139 600 348
Real estate loans 132 6 426 236
Installment loans 1,103 918 3,837 2,224
Credit card loans 70 180 460 484
---------------------------------------------
1,717 1,243 5,323 3,292
Recoveries:
Commercial loans & leases 32 77 245 241
Real estate loans 19 15 33 264
Installment loans 219 176 584 601
Credit card loans 16 20 57 60
---------------------------------------------
286 288 919 1,166
Net Charge-Offs 1,431 955 4,404 2,126
Provision charged to expense 2,673 2,296 6,524 4,355
---------------------------------------------
Balance at end of period $21,415 $19,336 $21,415 $19,336
=============================================
Ratio of net charge-offs during
the period to average loans
outstanding during the period (1) 0.30% 0.22% 0.32% 0.17%
=============================================
(1) On an annualized basis
NON-PERFORMING ASSETS
Non-performing assets increased $7.5 million from December 31, 1996 to $20.7
million at September 30, 1997. A large agri-business credit with a current
balance of $4.0 million was classified to non-accrual in the first quarter.
AMCORE anticipates the security behind this loan will minimize loss exposure
so as not to have a material adverse effect on future performance.
Non-performing assets as of September 30, 1997 and December 31, 1996 are
presented below:
September 30, 1997 December 31, 1996
-------------------------------------
Non-accrual loans and leases $18,903 $12,034
Restructured loans and leases 418 283
-------------------------
Total non-performing loans and leases $19,321 $12,317
=========================
Other real estate owned 1,422 920
-------------------------
Total non-performing assets $20,743 $13,237
=========================
Loans 90 days or more past due and still accruing $4,457 $3,684
19
Loans 90 or more days past due increased $773,000 when compared to December
31, 1996. This includes satellite dish receivables 90 or more days past due
of $935,000 at September 30, 1997 compared to $859,000 at December 31, 1996.
Satellite dish receivables 90 or more days past due peaked at $1.6 million in
March of 1997.
CAPITAL MANAGEMENT
Total stockholder's equity was $280.6 million at September 30, 1997, an
increase of $23.2 million from December 31, 1996, including a $9.4 million
increase in the unrealized gain on securities available for sale. The book
value per share of AMCORE common stock was $10.434 at September 30, 1997.
AMCORE increased dividends paid during the third quarter to $.12 versus the
$.11 per share paid in the prior two quarters of 1997.
AMCORE is considered "well capitalized" based on regulatory guidelines. The
previously mentioned $40 million of trust capital securities issued during the
first quarter are considered Tier I capital for regulatory purposes and caused
an increase in all regulatory capital ratios. AMCORE's leverage ratio was
8.28% at September 30, 1997. AMCORE's ratio of Tier I capital at 13.61% and
total risk based capital of 14.58% significantly exceed the regulatory minimum
as indicated in the table below:
September 30, 1997 September 30, 1996
------------------ ------------------
Amount Ratio Amount Ratio
==========================================
Tier 1 Capital $300,027 13.61% $239,003 11.82%
Tier 1 Capital Minimum 88,114 4.00% 80,881 4.00%
--------------------------------------------
Amount in Excess of Minimum $211,913 9.61% $158,122 7.82%
============================================
Total Capital $321,442 14.58% $258,205 12.76%
Total Capital Minimum 176,253 8.00% 161,884 8.00%
--------------------------------------------
Amount in Excess of Minimum $145,189 6.58% $96,321 4.76%
============================================
Risk Adjusted Assets $2,204,780 $2,022,802
========== ==========
20
PART II
ITEM 4. Submission of Matters to a Vote of Security Holders
(a)-(c) Incorporated herein by reference to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1997 (File No. 0-13393).
ITEM 6. Exhibits and Reports on Form 10-Q Page
(a) 3 Amended and Restated Articles of Incorporation of AMCORE Financial,
Inc. dated May 1, 1990 (Incorporated by reference to Exhibit 23 of
AMCORE's Annual Report on Form 10-K for the year ended December 31,
1989).
3.1 By-laws of AMCORE Financial, Inc. as amended May 17, 1990
(Incorporated by reference to Exhibit 3.1 of AMCORE's Annual Report
of Form 10-K for the year ended December 31, 1994).
4 Rights Agreement dated February 21, 1996, between AMCORE Financial,
Inc. and Firstar Trust Company (Incorporated by reference to AMCORE's
Form 8-K as filed with the Commission on February 28, 1996).
10.1 1995 Stock Incentive Plan (Incorporated by reference to Exhibit 22 of
AMCORE's Annual Report on Form 10-K for the year ended December 31,
1994).
10.2 AMCORE Financial, Inc. 1994 Stock Option Plan for Non-Employee
Directors (Incorporated by reference to Exhibit 23 of AMCORE's Annual
Report on Form 10-K for the year ended December 31, 1993).
10.3A Amended and Restated Transitional Compensation Agreement dated June
1, 1996 between AMCORE Financial, Inc. and Robert J. Meuleman.
(Incorporated by reference to Exhibit 10.3A of AMCORE's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1996.)
10.3B Amended and Restated Transitional Compensation Agreement dated June
1, 1996 between AMCORE Financial, Inc. and the following individuals:
John R. Hecht, and James S. Waddell. (Incorporated by reference to
Exhibit 10.3B of AMCORE's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996.)
10.3C Transitional Compensation Agreement dated June 1, 1996 between AMCORE
Financial, Inc. and the following individuals: Charles E. Gagnier
and Gerald W. Lister. (Incorporated by reference to Exhibit 10.3C of
AMCORE's Quarterly Report on Form 10-Q for the quarter ended June 30,
1996.)
10.3D Transitional Compensation Agreement dated June 1, 1996 between AMCORE
Financial, Inc. and the following individuals: William J.
Hippensteel, Alan W. Kennebeck and James F. Warsaw. (Incorporated by
reference to Exhibit 10.3D of AMCORE's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1996.)
10.3E Transitional Compensation Agreement dated May 21, 1997 between AMCORE
Financial, Inc. and Kenneth E. Edge.
21
10.3F Transitional Compensation Agreement dated May 21, 1997 between AMCORE
Financial, Inc. and Charie A. Zanck.
10.4 Commercial Paper Placement Agreement dated November 10, 1995 with M&I
Marshall and Ilsley Bank (Incorporated by reference to Exhibit 10.6
to AMCORE's Annual Report on Form 10-K for the year ended December
31, 1995).
10.5A Executive Insurance Agreement dated March 1, 1996 between AFI and the
following executives: Robert J. Meuleman and James S. Waddell
(Incorporated by reference to Exhibit 10.6 of the Company's Form 10-Q
for the quarter ended March 31, 1996).
10.5B Executive Insurance Agreement dated May 21, 1991 between AFI and
Kenneth E. Edge.
10.6 Indenture, dated as of March 25, 1997, between the Company and The
First National Bank of Chicago (incorporated herein by reference to
Exhibit 4.1 of the Company's registration statement on Form S-4,
Registration No. 333-25375).
10.7 Form of New Guarantee between the Company and The First National Bank
of Chicago (incorporated herein by reference to Exhibit 4.7 of the
Company's registration statement on Form S-4, Registration No.
333-25375).
10.8 First Amendment to Loan Agreement with M & I Marshall and Ilsley
Bank dated November 9, 1996.
10.9 Second Amendment to Loan Agreement with M & I Marshall and Ilsley
Bank dated September 29, 1997.
22 1997 Notice of Annual Meeting of Stockholders and Proxy Statement
(Incorporated by reference to Exhibit 22 of the Company's Annual
Report on Form 10-K for the year ended December 31, 1996).
27 Financial Data Schedule
99 Additional exhibits - Press release dated October 21, 1997.
- Press release dated November 12, 1997.
(b) One report on Form 8-K was filed with the Commission on October 7,
1997 announcing the signing of a definitive agreement for AMCORE to
acquire Investors Management Group on October 1, 1997 (Incorporated
by reference to AMCORE's Form 8-K as filed with the Commission on
October 7, 1997).
One report on Form 8-K was filed with the Commission on August 22,
1997 announcing the declaration of a three-for-two stock split and
cash dividend on August 18, 1997 (Incorporated by reference to
AMCORE's Form 8-K as filed with the Commission on August 22, 1997).
22
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: November 14, 1997
/s/ John R. Hecht
-------------------------------------------------
John R. Hecht
Senior Vice President and Chief Financial Officer
(Duly authorized officer of the registrant
and principal financial officer)
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