##### Table of Contents

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2006

Commission file number 013393

AMCORE Financial, Inc.



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|NEVADA                                                         |  | 363183870                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)

501 Seventh Street, Rockford, Illinois 61104

Telephone Number (815) 9682241



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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.

x  Yes ̈No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer ̈Accelerated filer  x                        Non-accelerated filer ̈

Indicate by check mark whether the registrant is a shell company (as
defined in Exchange Act Rule 12b-2).

 ̈Yes   x  No

The number of shares outstanding of the
registrants common stock, par value $0.22 per share, at August 1, 2006 was 24,574,000.



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##### Table of Contents

AMCORE Financial, Inc.

Form 10Q Table of Contents



|              |  |                                                                                                 |  |           
|------------- |  | ----------------------------------------------------------------------------------------------- |  | ----------
|              |  |                                                                                                 |  | PageNumber
|PART I        |  | FINANCIAL INFORMATION                                                                           |  | 3         
|              |  |                                                                                                
|Item 1        |  | Financial Statements (unaudited)                                                                |  | 3         
|              |  |                                                                                                
|              |  | Consolidated Balance Sheets as of June 30, 2006 and December 31, 2005                           |  | 3         
|              |  |                                                                                                
|              |  | Consolidated Statements of Income for the Three and Six Months Ended June 30, 2006 and 2005     |  | 4         
|              |  |                                                                                                
|              |  | Consolidated Statements of Stockholders Equity for the Six Months Ended June 30, 2006 and 2005 |  | 5         
|              |  |                                                                                                
|              |  | Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2006 and 2005           |  | 6         
|              |  |                                                                                                
|              |  | Notes to Consolidated Financial Statements                                                      |  | 7         
|              |  |                                                                                                
|Item 2        |  | Managements Discussion and Analysis of Financial Condition and Results of Operations           |  | 24        
|              |  |                                                                                                
|Item 3        |  | Quantitative and Qualitative Disclosures About Market Risk                                      |  | 49        
|              |  |                                                                                                
|Item 4        |  | Controls and Procedures                                                                         |  | 50        
|              |  |                                                                                                
|PART II       |  | OTHER INFORMATION                                                                               |  | 50        
|              |  |                                                                                                
|Item 1        |  | Legal Proceedings                                                                               |  | 50        
|              |  |                                                                                                
|Item 1A.      |  | Risk Factors                                                                                    |  | 50        
|              |  |                                                                                                
|Item 2        |  | Unregistered Sales of Equity Securities and Use of Proceeds                                     |  | 50        
|              |  |                                                                                                
|Item 4        |  | Submission of Matters to a Vote of Security Holders                                             |  | 51        
|              |  |                                                                                                
|Item 6        |  | Exhibits                                                                                        |  | 51        
|              | 
|Signatures    |  | 52                                                                                             
|              | 
|Exhibit Index |  | 53                                                                                             



2



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##### Table of Contents

PART 1. ITEM 1. FINANCIAL STATEMENTS

AMCORE FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)



|                                                                         |  |              |  |                  |  |                                   |           |   |                  |   |           |  
|------------------------------------------------------------------------ |  | ------------ |  | ---------------- |  | --------------------------------- | --------- | - | ---------------- | - | --------- | -
|                                                                         |  |              |  |                  |  | June 30,2006                      |           |   | December 31,2005 |  
|                                                                         |  |              |  |                  |  | (in thousands, except share data) |          
|ASSETS                                                                   |  |              |  |                  |  |                                   |           |   |                  |   |           |  
|Cash and cash equivalents                                                |  |              |  |                  |  | $                                 | 155,188   |   |                  | $ | 144,350   |  
|Interest earning deposits in banks and fed funds sold                    |  |              |  |                  |  |                                   | 126       |   |                  |   | 5,713     |  
|Loans held for sale                                                      |  |              |  |                  |  |                                   | 35,879    |   |                  |   | 24,138    |  
|Securities available for sale, at fair value                             |  |              |  |                  |  |                                   | 1,088,579 |   |                  |   | 1,183,384 |  
|Gross loans                                                              |  |              |  |                  |  |                                   | 3,864,807 |   |                  |   | 3,721,864 |  
|Allowance for loan losses                                                |  |              |  |                  |  |                                   | (40,560   | ) |                  |   | (40,756   | )
|                                                                         |  |              |  |                  |  |                                   |           |   |                  |   |           |  
|Net loans                                                                |  |              |  |                  |  | $                                 | 3,824,247 |   |                  | $ | 3,681,108 |  
|Company owned life insurance                                             |  |              |  |                  |  |                                   | 134,560   |   |                  |   | 132,472   |  
|Premises and equipment, net                                              |  |              |  |                  |  |                                   | 88,315    |   |                  |   | 84,818    |  
|Goodwill                                                                 |  |              |  |                  |  |                                   | 6,148     |   |                  |   | 6,148     |  
|Foreclosed real estate, net                                              |  |              |  |                  |  |                                   | 1,025     |   |                  |   | 621       |  
|Other assets                                                             |  |              |  |                  |  |                                   | 90,482    |   |                  |   | 82,150    |  
|                                                                         |  |              |  |                  |  |                                   |           |   |                  |   |           |  
|Total Assets                                                             |  |              |  |                  |  | $                                 | 5,424,549 |   |                  | $ | 5,344,902 |  
|                                                                         |  |              |  |                  |  |                                   |           |   |                  |   |           |  
|LIABILITIES                                                              |  |              |  |                  |  |                                   |           |   |                  |   |           |  
|Deposits:                                                                |  |              |  |                  |  |                                   |           |   |                  |   |           |  
|Non-interest bearing deposits                                            |  |              |  |                  |  | $                                 | 509,099   |   |                  | $ | 524,875   |  
|Interest bearing demand deposits                                         |  |              |  |                  |  |                                   | 1,695,669 |   |                  |   | 1,873,274 |  
|Time deposits                                                            |  |              |  |                  |  |                                   | 1,240,652 |   |                  |   | 1,188,337 |  
|                                                                         |  |              |  |                  |  |                                   |           |   |                  |   |           |  
|Total bank issued deposits                                               |  |              |  |                  |  | $                                 | 3,445,420 |   |                  | $ | 3,586,486 |  
|Wholesale deposits                                                       |  |              |  |                  |  |                                   | 750,274   |   |                  |   | 626,730   |  
|                                                                         |  |              |  |                  |  |                                   |           |   |                  |   |           |  
|Total deposits                                                           |  |              |  |                  |  | $                                 | 4,195,694 |   |                  | $ | 4,213,216 |  
|Short-term borrowings                                                    |  |              |  |                  |  |                                   | 397,871   |   |                  |   | 489,334   |  
|Long-term borrowings                                                     |  |              |  |                  |  |                                   | 365,579   |   |                  |   | 169,730   |  
|Other liabilities                                                        |  |              |  |                  |  |                                   | 70,651    |   |                  |   | 74,105    |  
|                                                                         |  |              |  |                  |  |                                   |           |   |                  |   |           |  
|Total Liabilities                                                        |  |              |  |                  |  | $                                 | 5,029,795 |   |                  | $ | 4,946,385 |  
|                                                                         |  |              |  |                  |  |                                   |           |   |                  |   |           |  
|STOCKHOLDERS EQUITY                                                     |  |              |  |                  |  |                                   |           |   |                  |   |           |  
|Preferred stock, $1 par value; authorized 10,000,000 shares; none issued |  |              |  |                  |  | $                                 |          |   |                  | $ |          |  
|Common stock, $0.22 par value; authorized 45,000,000 shares;             |  |              |  |                  |  |                                   |           |   |                  |   |           |  
|                                                                         |  | June 30,2006 |  | December 31,2005 |  |                                   |           |   |                  |  
|Issued                                                                   |  | 29,957,578   |  | 29,938,942       |  |                                   |           |   |                  |   |           |  
|Outstanding                                                              |  | 24,580,500   |  | 24,810,703       |  |                                   | 6,657     |   |                  |   | 6,652     |  
|Treasury stock                                                           |  | 5,377,078    |  | 5,128,239        |  |                                   | (111,884  | ) |                  |   | (104,240  | )
|Additional paid-in capital                                               |  |              |  |                  |  |                                   | 76,139    |   |                  |   | 74,110    |  
|Retained earnings                                                        |  |              |  |                  |  |                                   | 447,790   |   |                  |   | 435,113   |  
|Deferred compensation                                                    |  |              |  |                  |  |                                   |          |   |                  |   | (294      | )
|Accumulated other comprehensive loss                                     |  |              |  |                  |  |                                   | (23,948   | ) |                  |   | (12,824   | )
|                                                                         |  |              |  |                  |  |                                   |           |   |                  |   |           |  
|Total Stockholders Equity                                               |  |              |  |                  |  | $                                 | 394,754   |   |                  | $ | 398,517   |  
|                                                                         |  |              |  |                  |  |                                   |           |   |                  |   |           |  
|Total Liabilities and Stockholders Equity                               |  |              |  |                  |  | $                                 | 5,424,549 |   |                  | $ | 5,344,902 |  
|                                                                         |  |              |  |                  |  |                                   |           |   |                  |   |           |  

See accompanying notes to consolidated financial statements.



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##### Table of Contents

AMCORE FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)



|                                                                |  |                                       |        |   |                                  |   |        |      |  |   |         |   |  |   |         |  
|--------------------------------------------------------------- |  | ------------------------------------- | ------ | - | -------------------------------- | - | ------ | ---- |  | - | ------- | - |  | - | ------- | -
|                                                                |  | For the Three MonthsEnded June 30,    |        |   | For the Six MonthsEnded June 30, |  
|                                                                |  | 2006                                  |        |   | 2005                             |   |        | 2006 |  |   | 2005    |  
|                                                                |  | (in thousands, except per share data) |       
|INTEREST INCOME                                                 |  |                                       |        |   |                                  |   |        |      |  |   |         |   |  |   |         |  
|Interest and fees on loans                                      |  | $                                     | 71,093 |   |                                  | $ | 54,265 |      |  | $ | 137,983 |   |  | $ | 104,040 |  
|Interest on securities:                                         |  |                                       |        |   |                                  |   |        |      |  |   |         |   |  |   |         |  
|Taxable                                                         |  |                                       | 10,386 |   |                                  |   | 11,165 |      |  |   | 21,402  |   |  |   | 22,455  |  
|Tax-exempt                                                      |  |                                       | 1,660  |   |                                  |   | 1,953  |      |  |   | 3,368   |   |  |   | 3,858   |  
|                                                                |  |                                       |        |   |                                  |   |        |      |  |   |         |   |  |   |         |  
|Total Income on Securities                                      |  | $                                     | 12,046 |   |                                  | $ | 13,118 |      |  | $ | 24,770  |   |  | $ | 26,313  |  
|                                                                |  |                                       |        |   |                                  |   |        |      |  |   |         |   |  |   |         |  
|Interest on federal funds sold and other short-term investments |  |                                       | 71     |   |                                  |   | 57     |      |  |   | 158     |   |  |   | 82      |  
|Interest and fees on loans held for sale                        |  |                                       | 341    |   |                                  |   | 324    |      |  |   | 624     |   |  |   | 557     |  
|Interest on deposits in banks                                   |  |                                       | 16     |   |                                  |   | 12     |      |  |   | 26      |   |  |   | 18      |  
|                                                                |  |                                       |        |   |                                  |   |        |      |  |   |         |   |  |   |         |  
|Total Interest Income                                           |  | $                                     | 83,567 |   |                                  | $ | 67,776 |      |  | $ | 163,561 |   |  | $ | 131,010 |  
|                                                                |  |                                       |        |   |                                  |   |        |      |  |   |         |   |  |   |         |  
|INTEREST EXPENSE                                                |  |                                       |        |   |                                  |   |        |      |  |   |         |   |  |   |         |  
|Interest on deposits                                            |  | $                                     | 33,014 |   |                                  | $ | 21,558 |      |  | $ | 62,856  |   |  | $ | 39,534  |  
|Interest on short-term borrowings                               |  |                                       | 4,112  |   |                                  |   | 3,847  |      |  |   | 9,953   |   |  |   | 7,373   |  
|Interest on long-term borrowings                                |  |                                       | 5,121  |   |                                  |   | 2,476  |      |  |   | 8,002   |   |  |   | 4,896   |  
|                                                                |  |                                       |        |   |                                  |   |        |      |  |   |         |   |  |   |         |  
|Total Interest Expense                                          |  | $                                     | 42,247 |   |                                  | $ | 27,881 |      |  | $ | 80,811  |   |  | $ | 51,803  |  
|                                                                |  |                                       |        |   |                                  |   |        |      |  |   |         |   |  |   |         |  
|Net Interest Income                                             |  |                                       | 41,320 |   |                                  |   | 39,895 |      |  |   | 82,750  |   |  |   | 79,207  |  
|Provision for loan losses                                       |  |                                       | 2,250  |   |                                  |   | 3,502  |      |  |   | 4,250   |   |  |   | 6,002   |  
|                                                                |  |                                       |        |   |                                  |   |        |      |  |   |         |   |  |   |         |  
|Net Interest Income After Provision for Loan Losses             |  | $                                     | 39,070 |   |                                  | $ | 36,393 |      |  | $ | 78,500  |   |  | $ | 73,205  |  
|                                                                |  |                                       |        |   |                                  |   |        |      |  |   |         |   |  |   |         |  
|NON-INTEREST INCOME                                             |  |                                       |        |   |                                  |   |        |      |  |   |         |   |  |   |         |  
|Investment management and trust income                          |  | $                                     | 3,970  |   |                                  | $ | 3,746  |      |  | $ | 7,635   |   |  | $ | 7,707   |  
|Service charges on deposits                                     |  |                                       | 6,605  |   |                                  |   | 5,871  |      |  |   | 12,155  |   |  |   | 11,034  |  
|Mortgage banking income                                         |  |                                       | 1,061  |   |                                  |   | 413    |      |  |   | 2,293   |   |  |   | 1,728   |  
|Company owned life insurance income                             |  |                                       | 1,149  |   |                                  |   | 1,560  |      |  |   | 2,078   |   |  |   | 2,468   |  
|Brokerage commission income                                     |  |                                       | 744    |   |                                  |   | 744    |      |  |   | 1,625   |   |  |   | 1,477   |  
|Bankcard fee income                                             |  |                                       | 1,515  |   |                                  |   | 1,211  |      |  |   | 2,872   |   |  |   | 2,336   |  
|Gain on sale of loans                                           |  |                                       | 149    |   |                                  |   | 185    |      |  |   | 310     |   |  |   | 296     |  
|Other                                                           |  |                                       | 2,273  |   |                                  |   | 1,735  |      |  |   | 3,972   |   |  |   | 3,805   |  
|                                                                |  |                                       |        |   |                                  |   |        |      |  |   |         |   |  |   |         |  
|Non-Interest Income, Excluding Net Security Gains               |  | $                                     | 17,466 |   |                                  | $ | 15,465 |      |  | $ | 32,940  |   |  | $ | 30,851  |  
|Net security gains                                              |  |                                       |       |   |                                  |   | 455    |      |  |   | 225     |   |  |   | 404     |  
|                                                                |  |                                       |        |   |                                  |   |        |      |  |   |         |   |  |   |         |  
|Total Non-Interest Income                                       |  | $                                     | 17,466 |   |                                  | $ | 15,920 |      |  | $ | 33,165  |   |  | $ | 31,255  |  
|OPERATING EXPENSES                                              |  |                                       |        |   |                                  |   |        |      |  |   |         |   |  |   |         |  
|Compensation expense                                            |  | $                                     | 20,023 |   |                                  | $ | 16,906 |      |  | $ | 40,018  |   |  | $ | 33,192  |  
|Employee benefits                                               |  |                                       | 4,292  |   |                                  |   | 4,158  |      |  |   | 9,353   |   |  |   | 9,015   |  
|Net occupancy expense                                           |  |                                       | 2,551  |   |                                  |   | 2,546  |      |  |   | 5,221   |   |  |   | 5,303   |  
|Equipment expense                                               |  |                                       | 2,341  |   |                                  |   | 2,426  |      |  |   | 4,556   |   |  |   | 4,788   |  
|Data processing expense                                         |  |                                       | 790    |   |                                  |   | 508    |      |  |   | 1,545   |   |  |   | 1,113   |  
|Professional fees                                               |  |                                       | 2,655  |   |                                  |   | 1,055  |      |  |   | 4,360   |   |  |   | 2,030   |  
|Communication expense                                           |  |                                       | 1,220  |   |                                  |   | 1,181  |      |  |   | 2,478   |   |  |   | 2,263   |  
|Advertising and business development                            |  |                                       | 1,838  |   |                                  |   | 1,579  |      |  |   | 3,561   |   |  |   | 3,278   |  
|Other                                                           |  |                                       | 4,548  |   |                                  |   | 5,043  |      |  |   | 9,556   |   |  |   | 9,229   |  
|                                                                |  |                                       |        |   |                                  |   |        |      |  |   |         |   |  |   |         |  
|Total Operating Expenses                                        |  | $                                     | 40,258 |   |                                  | $ | 35,402 |      |  | $ | 80,648  |   |  | $ | 70,211  |  
|                                                                |  |                                       |        |   |                                  |   |        |      |  |   |         |   |  |   |         |  
|Income from continuing operations before income taxes           |  | $                                     | 16,278 |   |                                  | $ | 16,911 |      |  | $ | 31,017  |   |  | $ | 34,249  |  
|Income taxes                                                    |  |                                       | 4,844  |   |                                  |   | 4,748  |      |  |   | 9,124   |   |  |   | 9,958   |  
|                                                                |  |                                       |        |   |                                  |   |        |      |  |   |         |   |  |   |         |  
|Income from continuing operations                               |  | $                                     | 11,434 |   |                                  | $ | 12,163 |      |  | $ | 21,893  |   |  | $ | 24,291  |  
|                                                                |  |                                       |        |   |                                  |   |        |      |  |   |         |   |  |   |         |  
|Discontinued operations:                                        |  |                                       |        |   |                                  |   |        |      |  |   |         |   |  |   |         |  
|(Loss) income from discontinued operations                      |  | $                                     | (18    | ) |                                  | $ | 5      |      |  | $ | (131    | ) |  |   | (92     | )
|Income tax (benefit) expense                                    |  |                                       | (7     | ) |                                  |   | 11     |      |  |   | (51     | ) |  |   | (8      | )
|                                                                |  |                                       |        |   |                                  |   |        |      |  |   |         |   |  |   |         |  
|Loss from discontinued operations                               |  | $                                     | (11    | ) |                                  | $ | (6     | )    |  | $ | (80     | ) |  | $ | (84     | )
|                                                                |  |                                       |        |   |                                  |   |        |      |  |   |         |   |  |   |         |  
|Net Income                                                      |  | $                                     | 11,423 |   |                                  | $ | 12,157 |      |  | $ | 21,813  |   |  | $ | 24,207  |  
|                                                                |  |                                       |        |   |                                  |   |        |      |  |   |         |   |  |   |         |  
|EARNINGS PER COMMON SHARE                                       |  |                                       |        |   |                                  |   |        |      |  |   |         |   |  |   |         |  
|Basic:        Income from continuing operations                 |  | $                                     | 0.46   |   |                                  | $ | 0.49   |      |  | $ | 0.88    |   |  | $ | 0.98    |  
|Loss from
discontinued operations                               |  |                                       |       |   |                                  |   |       |      |  |   |        |   |  |   |        |  
|                                                                |  |                                       |        |   |                                  |   |        |      |  |   |         |   |  |   |         |  
|Net
Income                                                      |  | $                                     | 0.46   |   |                                  | $ | 0.49   |      |  | $ | 0.88    |   |  | $ | 0.98    |  
|                                                                |  |                                       |        |   |                                  |   |        |      |  |   |         |   |  |   |         |  
|Diluted:    Income from continuing operations                   |  | $                                     | 0.46   |   |                                  | $ | 0.49   |      |  | $ | 0.88    |   |  | $ | 0.97    |  
|Loss
from discontinued operations                               |  |                                       |       |   |                                  |   |       |      |  |   |        |   |  |   |        |  
|                                                                |  |                                       |        |   |                                  |   |        |      |  |   |         |   |  |   |         |  
|Net
Income                                                      |  | $                                     | 0.46   |   |                                  | $ | 0.49   |      |  | $ | 0.88    |   |  | $ | 0.97    |  
|                                                                |  |                                       |        |   |                                  |   |        |      |  |   |         |   |  |   |         |  
|DIVIDENDS PER COMMON SHARE                                      |  | $                                     | 0.185  |   |                                  | $ | 0.17   |      |  | $ | 0.37    |   |  | $ | 0.34    |  
|                                                                |  |                                       |        |  
|AVERAGE COMMON SHARES OUTSTANDING                               |  |                                       |        |   |                                  |   |        |      |  |   |         |   |  |   |         |  
|Basic                                                           |  |                                       | 24,668 |   |                                  |   | 24,805 |      |  |   | 24,739  |   |  |   | 24,805  |  
|Diluted                                                         |  |                                       | 24,758 |   |                                  |   | 25,020 |      |  |   | 24,856  |   |  |   | 25,044  |  

See accompanying notes to consolidated financial statements.



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##### Table of Contents

AMCORE FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

(Unaudited)



|                                                                                         |  |                                   |       |               |   |          |                          |  |   |                  |   |  |                      |         |   |                                            |   |      |                          |  |   |         |   |  |   |         |  
|---------------------------------------------------------------------------------------- |  | --------------------------------- | ----- | ------------- | - | -------- | ------------------------ |  | - | ---------------- | - |  | -------------------- | ------- | - | ------------------------------------------ | - | ---- | ------------------------ |  | - | ------- | - |  | - | ------- | -
|                                                                                         |  | CommonStock                       |       | TreasuryStock |   |          | AdditionalPaid-inCapital |  |   | RetainedEarnings |   |  | DeferredCompensation |         |   | AccumulatedOtherComprehensiveIncome (Loss) |   |      | TotalStockholdersEquity | 
|                                                                                         |  | (in thousands, except share data) |      
|Balance at December 31, 2004                                                             |  | $                                 | 6,643 |               | $ | (102,832 | )                        |  | $ | 74,102           |   |  | $                    | 407,045 |   |                                            | $ | (273 | )                        |  | $ | 1,893   |   |  | $ | 386,578 |  
|                                                                                         |  |                                   |       |               |   |          |                          |  |   |                  |   |  |                      |         |   |                                            |   |      |                          |  |   |         |   |  |   |         |  
|Comprehensive Income (Loss):                                                             |  |                                   |       |               |   |          |                          |  |   |                  |   |  |                      |         |   |                                            |   |      |                          |  |   |         |   |  |   |         |  
|Net Income                                                                               |  |                                   |      |               |   |         |                          |  |   |                 |   |  |                      | 24,207  |   |                                            |   |     |                          |  |   |        |   |  |   | 24,207  |  
|Net unrealized holding losses on securities available for sale arising during the period |  |                                   |      |               |   |         |                          |  |   |                 |   |  |                      |        |   |                                            |   |     |                          |  |   | (4,568  | ) |  |   | (4,568  | )
|Less reclassification adjustment for net security gains included in net income           |  |                                   |      |               |   |         |                          |  |   |                 |   |  |                      |        |   |                                            |   |     |                          |  |   | (404    | ) |  |   | (404    | )
|Income tax effect related to items of other comprehensive income                         |  |                                   |      |               |   |         |                          |  |   |                 |   |  |                      |        |   |                                            |   |     |                          |  |   | 1,893   |   |  |   | 1,893   |  
|                                                                                         |  |                                   |       |               |   |          |                          |  |   |                  |   |  |                      |         |   |                                            |   |      |                          |  |   |         |   |  |   |         |  
|Net unrealized losses on securities available for sale                                   |  |                                   |      |               |   |         |                          |  |   |                 |   |  |                      |        |   |                                            |   |     |                          |  |   | (3,079  | ) |  |   | (3,079  | )
|                                                                                         |  |                                   |       |               |   |          |                          |  |   |                  |   |  |                      |         |   |                                            |   |      |                          |  |   |         |   |  |   |         |  
|Comprehensive Income (Loss)                                                              |  |                                   |      |               |   |         |                          |  |   |                 |   |  |                      | 24,207  |   |                                            |   |     |                          |  |   | (3,079  | ) |  |   | 21,128  |  
|Cash dividends on common stock - $0.34 per share                                         |  |                                   |      |               |   |         |                          |  |   |                 |   |  |                      | (8,436  | ) |                                            |   |     |                          |  |   |        |   |  |   | (8,436  | )
|Purchase of 70,812 shares for the treasury                                               |  |                                   |      |               |   | (1,997   | )                        |  |   |                 |   |  |                      |        |   |                                            |   |     |                          |  |   |        |   |  |   | (1,997  | )
|Deferred compensation expense and other                                                  |  |                                   |      |               |   |         |                          |  |   | 514              |   |  |                      |        |   |                                            |   | 78   |                          |  |   |        |   |  |   | 592     |  
|Reissuance of 54,812 treasury shares for incentive plans                                 |  |                                   |      |               |   | 1,570    |                          |  |   | (553             | ) |  |                      |        |   |                                            |   | (220 | )                        |  |   |        |   |  |   | 797     |  
|Issuance of 18,414 common shares for Employee Stock Plan                                 |  |                                   | 4     |               |   |         |                          |  |   | 438              |   |  |                      |        |   |                                            |   |     |                          |  |   |        |   |  |   | 442     |  
|                                                                                         |  |                                   |       |               |   |          |                          |  |   |                  |   |  |                      |         |   |                                            |   |      |                          |  |   |         |   |  |   |         |  
|Balance at June 30, 2005                                                                 |  | $                                 | 6,647 |               | $ | (103,259 | )                        |  | $ | 74,501           |   |  | $                    | 422,816 |   |                                            | $ | (415 | )                        |  | $ | (1,186  | ) |  | $ | 399,104 |  
|                                                                                         |  |                                   |       |               |   |          |                          |  |   |                  |   |  |                      |         |   |                                            |   |      |                          |  |   |         |   |  |   |         |  
|                                                                                         |  |                                   |       |               |   |          |                         
|Balance at December 31, 2005                                                             |  | $                                 | 6,652 |               | $ | (104,240 | )                        |  | $ | 74,110           |   |  | $                    | 435,113 |   |                                            | $ | (294 | )                        |  | $ | (12,824 | ) |  | $ | 398,517 |  
|                                                                                         |  |                                   |       |               |   |          |                          |  |   |                  |   |  |                      |         |   |                                            |   |      |                          |  |   |         |   |  |   |         |  
|Comprehensive Income (Loss)                                                              |  |                                   |       |               |   |          |                          |  |   |                  |   |  |                      |         |   |                                            |   |      |                          |  |   |         |   |  |   |         |  
|Net Income                                                                               |  |                                   |      |               |   |         |                          |  |   |                 |   |  |                      | 21,813  |   |                                            |   |     |                          |  |   |        |   |  |   | 21,813  |  
|Net unrealized holding losses on securities available for sale arising during the period |  |                                   |      |               |   |         |                          |  |   |                 |   |  |                      |        |   |                                            |   |     |                          |  |   | (17,704 | ) |  |   | (17,704 | )
|Less reclassification adjustment for net security gains included in net income           |  |                                   |      |               |   |         |                          |  |   |                 |   |  |                      |        |   |                                            |   |     |                          |  |   | (225    | ) |  |   | (225    | )
|Income tax effect related to items of other comprehensive income                         |  |                                   |      |               |   |         |                          |  |   |                 |   |  |                      |        |   |                                            |   |     |                          |  |   | 6,805   |   |  |   | 6,805   |  
|                                                                                         |  |                                   |       |               |   |          |                          |  |   |                  |   |  |                      |         |   |                                            |   |      |                          |  |   |         |   |  |   |         |  
|Net unrealized losses on securities available for sale                                   |  |                                   |      |               |   |         |                          |  |   |                 |   |  |                      |        |   |                                            |   |     |                          |  |   | (11,124 | ) |  |   | (11,124 | )
|                                                                                         |  |                                   |       |               |   |          |                          |  |   |                  |   |  |                      |         |   |                                            |   |      |                          |  |   |         |   |  |   |         |  
|Comprehensive Income (Loss)                                                              |  |                                   |      |               |   |         |                          |  |   |                 |   |  |                      | 21,813  |   |                                            |   |     |                          |  |   | (11,124 | ) |  |   | 10,689  |  
|Cash dividends on common stock - $0.37 per share                                         |  |                                   |      |               |   |         |                          |  |   |                 |   |  |                      | (9,136  | ) |                                            |   |     |                          |  |   |        |   |  |   | (9,136  | )
|Purchase of 337,796 shares for the treasury                                              |  |                                   |      |               |   | (10,369  | )                        |  |   |                 |   |  |                      |        |   |                                            |   |     |                          |  |   |        |   |  |   | (10,369 | )
|Deferred compensation expense and other                                                  |  |                                   |      |               |   |         |                          |  |   | 109              |   |  |                      |        |   |                                            |   |     |                          |  |   |        |   |  |   | 109     |  
|Stock-based compensation                                                                 |  |                                   |      |               |   |         |                          |  |   | 1,902            |   |  |                      |        |   |                                            |   |     |                          |  |   |        |   |  |   | 1,902   |  
|Reclassification upon adoption of SFAS No. 123R                                          |  |                                   |       |               |   |          |                          |  |   | 342              |   |  |                      |         |   |                                            |   | 294  |                          |  |   |        |   |  |   | 636     |  
|Reissuance of 88,957 treasury shares for incentive plans                                 |  |                                   |      |               |   | 2,725    |                          |  |   | (773             | ) |  |                      |        |   |                                            |   |     |                          |  |   |        |   |  |   | 1,952   |  
|Issuance of 18,636 common shares for Employee Stock Plan                                 |  |                                   | 5     |               |   |         |                          |  |   | 449              |   |  |                      |        |   |                                            |   |     |                          |  |   |        |   |  |   | 454     |  
|                                                                                         |  |                                   |       |               |   |          |                          |  |   |                  |   |  |                      |         |   |                                            |   |      |                          |  |   |         |   |  |   |         |  
|Balance at June 30, 2006                                                                 |  | $                                 | 6,657 |               | $ | (111,884 | )                        |  | $ | 76,139           |   |  | $                    | 447,790 |   |                                            | $ |     |                          |  | $ | (23,948 | ) |  | $ | 394,754 |  
|                                                                                         |  |                                   |       |               |   |          |                          |  |   |                  |   |  |                      |         |   |                                            |   |      |                          |  |   |         |   |  |   |         |  

See accompanying notes to consolidated financial statements.



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AMCORE FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



|                                                                                                  |  |                          |          |   |      |   |          |  
|------------------------------------------------------------------------------------------------- |  | ------------------------ | -------- | - | ---- | - | -------- | -
|                                                                                                  |  | Six Months EndedJune 30, |         
|                                                                                                  |  | 2006                     |          |   | 2005 |  
|                                                                                                  |  | (in thousands)           |         
|Cash Flows From Operating Activities                                                              |  |                          |          |   |      |   |          |  
|Net income                                                                                        |  | $                        | 21,813   |   |      | $ | 24,207   |  
|Adjustments to reconcile net income from operations to net cash provided by operating activities: |  |                          |          |   |      |   |          |  
|Depreciation and amortization of premises and equipment                                           |  |                          | 3,503    |   |      |   | 4,133    |  
|Amortization and accretion of securities, net                                                     |  |                          | 855      |   |      |   | 795      |  
|Stock-based compensation expense                                                                  |  |                          | 1,902    |   |      |   |         |  
|Tax benefit on exercise of stock options                                                          |  |                          | 328      |   |      |   | 201      |  
|Excess tax benefits from stock-based compensation                                                 |  |                          | (121     | ) |      |   |         |  
|Provision for loan losses                                                                         |  |                          | 4,250    |   |      |   | 6,002    |  
|Company owned life insurance income, net of death benefits                                        |  |                          | (2,078   | ) |      |   | (2,468   | )
|Net securities gains                                                                              |  |                          | (225     | ) |      |   | (404     | )
|Net gains on sale of loans                                                                        |  |                          | (310     | ) |      |   | (296     | )
|Net gains on sale of mortgage loans held for sale                                                 |  |                          | (1,098   | ) |      |   | (1,540   | )
|Originations of mortgage loans held for sale                                                      |  |                          | (158,402 | ) |      |   | (162,441 | )
|Proceeds from sales of mortgage loans held for sale                                               |  |                          | 147,759  |   |      |   | 153,469  |  
|Deferred income tax expense                                                                       |  |                          | 554      |   |      |   | 114      |  
|Net (increase) decrease in other assets                                                           |  |                          | 304      |   |      |   | 3,502    |  
|Net decrease in other liabilities                                                                 |  |                          | (3,746   | ) |      |   | (1,471   | )
|                                                                                                  |  |                          |          |   |      |   |          |  
|Net cash provided by operating activities                                                         |  | $                        | 15,288   |   |      | $ | 23,803   |  
|                                                                                                  |  |                          |          |   |      |   |          |  
|Cash Flows From Investing Activities                                                              |  |                          |          |   |      |   |          |  
|Proceeds from maturities of securities available for sale                                         |  | $                        | 105,068  |   |      | $ | 113,942  |  
|Proceeds from sales of securities available for sale                                              |  |                          | 40,488   |   |      |   | 32,494   |  
|Purchase of securities available for sale                                                         |  |                          | (69,309  | ) |      |   | (99,692  | )
|Net decrease (increase) in federal funds sold and other short-term investments                    |  |                          | 5,200    |   |      |   | (31,380  | )
|Net decrease (increase) in interest earning deposits in banks                                     |  |                          | 387      |   |      |   | (6,430   | )
|Net increase in loans                                                                             |  |                          | (155,002 | ) |      |   | (225,064 | )
|Proceeds from the sale of loans                                                                   |  |                          | 4,596    |   |      |   | 3,040    |  
|Investment in company owned life insurance                                                        |  |                          | (10      | ) |      |   | (3,314   | )
|Premises and equipment expenditures, net                                                          |  |                          | (6,965   | ) |      |   | (3,422   | )
|Proceeds from the sale of foreclosed real estate                                                  |  |                          | 502      |   |      |   | 4,247    |  
|                                                                                                  |  |                          |          |   |      |   |          |  
|Net cash used for investing activities                                                            |  | $                        | (75,045  | ) |      | $ | (215,579 | )
|                                                                                                  |  |                          |          |   |      |   |          |  
|Cash Flows From Financing Activities                                                              |  |                          |          |   |      |   |          |  
|Net (decrease) increase in non-interest-bearing demand deposits                                   |  | $                        | (15,776  | ) |      | $ | 21,780   |  
|Net (decrease) increase in interest-bearing demand deposits                                       |  |                          | (177,605 | ) |      |   | 258,660  |  
|Net increase in time deposits                                                                     |  |                          | 52,315   |   |      |   | 11,026   |  
|Net increase (decrease) in wholesale deposits                                                     |  |                          | 123,544  |   |      |   | (10,639  | )
|Net decrease in short-term borrowings                                                             |  |                          | (98,977  | ) |      |   | (82,713  | )
|Proceeds from long-term borrowings                                                                |  |                          | 204,400  |   |      |   | 14,500   |  
|Dividends paid                                                                                    |  |                          | (9,136   | ) |      |   | (8,436   | )
|Issuance of common shares for employee stock plan                                                 |  |                          | 454      |   |      |   | 442      |  
|Reissuance of treasury shares for incentive plans                                                 |  |                          | 1,624    |   |      |   | 596      |  
|Excess tax benefits from stock-based compensation                                                 |  |                          | 121      |   |      |   |         |  
|Purchase of shares for treasury                                                                   |  |                          | (10,369  | ) |      |   | (1,997   | )
|                                                                                                  |  |                          |          |   |      |   |          |  
|Net cash provided by financing activities                                                         |  | $                        | 70,595   |   |      | $ | 203,219  |  
|                                                                                                  |  |                          |          |   |      |   |          |  
|Net change in cash and cash equivalents                                                           |  | $                        | 10,838   |   |      | $ | 11,443   |  
|Cash and cash equivalents:                                                                        |  |                          |          |   |      |   |          |  
|Beginning of year                                                                                 |  |                          | 144,350  |   |      |   | 117,072  |  
|                                                                                                  |  |                          |          |   |      |   |          |  
|End of period                                                                                     |  | $                        | 155,188  |   |      | $ | 128,515  |  
|                                                                                                  |  |                          |          |   |      |   |          |  
|Supplemental Disclosures of Cash Flow Information                                                 |  |                          |          |   |      |   |          |  
|Cash payments for:                                                                                |  |                          |          |   |      |   |          |  
|Interest paid to depositors                                                                       |  | $                        | 59,458   |   |      | $ | 38,199   |  
|Interest paid on borrowings                                                                       |  |                          | 17,049   |   |      |   | 12,471   |  
|Income tax payments                                                                               |  |                          | 10,262   |   |      |   | 8,610    |  
|                                                                                                  |  |                         
|Non-Cash Investing and Financing                                                                  |  |                          |          |   |      |   |          |  
|Foreclosed real estate - acquired in settlement of loans                                          |  |                          | 752      |   |      |   | 1,473    |  
|Transfer current portion of long-term borrowings to short-term borrowings                         |  |                          | 7,514    |   |      |   | 16,709   |  
|Capitalized interest                                                                              |  |                          | 160      |   |      |   | 21       |  

See accompanying notes to consolidated financial statements.



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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 U.S. generally accepted
accounting principles for interim financial reporting and with instructions for Form 10Q and Rule 1001 of Regulation SX. The preparation of Consolidated Financial Statements requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities as of the balance sheet date and revenues and expenses for the period. Actual results could differ from these estimates. These financial statements include all adjustments (consisting of
normal recurring accruals) that in the opinion of management are considered necessary for the fair presentation of the financial position and results of operations for the periods shown. Certain prior year amounts may be reclassified to conform to
the current year presentation.

The accompanying unaudited Consolidated Financial Statements and related notes, including the critical
accounting estimates, should be read in conjunction with the audited Financial Statements and related notes contained in the 2005 Annual Report of AMCORE Financial, Inc. and Subsidiaries (the Company) on Form 10-K (2005 Form 10-K).
Effective the first quarter of 2006, the Company began recognizing compensation expense for stock options with the adoption of Statement of Financial Accounting Standards (SFAS) No. 123 (Revised 2004) Share-Based Payment (SFAS
123R). There have been no other significant changes to our accounting policies from the 2005 Form 10-K.

Operating results for the three-
and six-month periods ended June 30, 2006 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2006. For further information, refer to the Consolidated Financial Statements and
footnotes thereto included in the 2005 Form 10K.

Discontinued Operations

During 2005, the Company closed on the transition of three Vintage equity funds into two mutual funds managed by Federated Investors, Inc. and sold its
subsidiary IMG. The transition of $142 million in assets of three Vintage equity funds to the two Federated mutual funds was completed in September, 2005, resulting in a pre-tax gain of $1.3 million. On December 30, 2005, the Company completed
the sale of IMG resulting in a $576,000 pre-tax loss, net of associated costs, and a $3.2 million tax charge. The operating results for IMG have been reclassified and shown as discontinued operations on the Statements of Income and in the Notes to
the Consolidated Financial Statements for all periods presented. This includes the effect of the sale of IMG and the transition of the Vintage equity funds.

New Accounting Standards

In June 2006, the Financial Accounting Standards Board (FASB) issued
Financial Interpretation No. (FIN) 48, Accounting for Uncertainty in Income Taxesan Interpretation of FASB Statement No. 109that clarifies the accounting for uncertain tax positions recognized in an enterprises financial
statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. This interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position
taken or expected to be taken in a tax return. This interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. This interpretation is effective for
fiscal years beginning after December 15, 2006. The Company has not completed its evaluation of the standard, but adoption of this interpretation is not expected to have a material impact on the Companys consolidated financial position or
results of operations.

In March 2006, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 156, Accounting
for Servicing of Financial Assets (SFAS No. 156), which amends SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. SFAS No. 156 requires an entity to
separately recognize servicing assets and servicing liabilities and to report these balances at fair value upon inception. Future methods of assessing values can be performed using either the amortization or fair value measurement techniques.
Adoption of SFAS No. 156 is required for transactions occurring in fiscal years beginning after September 15, 2006. The adoption of this standard is not expected to have a material impact on the Companys consolidated financial
position or results of operations.

In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial
Instruments, which establishes the accounting for certain derivatives embedded in other financial instruments (hybrid financial instruments). This Statement is effective for all financial instruments acquired, issued, or subject to
a remeasurement event occurring after January 1, 2007, the start of the Companys next fiscal year. The adoption of this standard is not expected to have a material impact on the Companys consolidated financial position or results of
operations.

In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections, which provides guidance
on the accounting for and reporting of accounting changes and error corrections. It establishes, unless impracticable, retrospective



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application as the required method for reporting a change in accounting principle in the absence of explicit transition requirements specific to the newly
adopted accounting principle. SFAS No. 154 also addresses the reporting of a correction of an error by restating previously issued financial statements. This Statement is effective, on a prospective basis, for fiscal years beginning after
December 15, 2005. The adoption of SFAS No. 154 on January 1, 2006 did not affect on the Companys financial position or results of operation.

SFAS No. 123R, Share-Based Payment was issued in December 2004 and requires compensation cost relating to share-based payment transactions be recognized in the Consolidated Financial Statements for
periods beginning after December 15, 2005. Companies are no longer able to account for share-based compensation transactions using the intrinsic value method in accordance with Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees. Instead, companies are required to account for such transactions using a fair-value method and recognize the expense in the Consolidated Statements of Income. SFAS 123R supercedes APB Opinion No. 25 and
revises guidance in SFAS 123, Accounting for Stock-Based Compensation. See Note 13 of the Notes to the Consolidated Financial Statements for information on the assumptions used to calculate the fair value of stock-based compensation and
other disclosures required by SFAS 123R.

In November 2005, the FASB issued FASB Staff Position No. FAS 123R-3 Transition Election
Related to Accounting for Tax Effects of Share-Based Payment Awards that allows for a simplified method to establish the beginning balance of the additional paid-in capital pool (APIC Pool) related to the tax effects of employee stock-based
compensation, and to determine the subsequent impact on the APIC Pool and Consolidated Statements of Cash Flows of the tax effects of employee stock-based compensation awards that are outstanding upon adoption of SFAS 123R. The Company has not yet
determined if the simplified method will be elected. The election will be determined by the fourth quarter of 2006.

In November 2005, the
FASB issued FASB Staff Position (FSP) Nos. FAS 115-1 and FAS 124-1, The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments, which applies to reporting periods beginning after December 15, 2005. The
FSPs provide guidance on determining when investments in certain debt and equity securities are considered impaired, whether that impairment is other-than-temporary, and on measuring such impairment loss. The FSPs also include accounting
considerations subsequent to the recognition of other-than-temporary impairment and requirements for certain disclosures about unrealized losses that have not been recognized as other-than-temporary impairments. The adoption of the FSPs on
January 1, 2006 did not have a material effect on the Companys financial position or results of operation.



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NOTE 2 - SECURITIES

A summary of information for investment securities, categorized by security type, at June 30, 2006 and December 31, 2005 follows. Fair values are based on quoted market prices or are based on quoted prices
for similar financial instruments.



|                                                    |  |                |           |                      |   |                       |  |   |            |   |  |   |          
|--------------------------------------------------- |  | -------------- | --------- | -------------------- | - | --------------------- |  | - | ---------- | - |  | - | ---------
|                                                    |  | AmortizedCost  |           | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | Fair Value
|                                                    |  | (in thousands)
|June 30, 2006                                       |  |                |          
|Securities Available for Sale:                      |  |                |           |                      |   |                       |  |   |            |   |  |   |          
|U.S. Treasury                                       |  | $              | 5,005     |                      | $ |                      |  | $ | (101       | ) |  | $ | 4,904    
|U.S. Government sponsored enterprises (GSEs)        |  |                | 69,733    |                      |   | 18                    |  |   | (1,287     | ) |  |   | 68,464   
|GSEs and U.S. agency mortgage-backed securities (1) |  |                | 834,099   |                      |   | 243                   |  |   | (35,562    | ) |  |   | 798,780  
|State and political subdivisions                    |  |                | 162,824   |                      |   | 1,216                 |  |   | (2,425     | ) |  |   | 161,615  
|Corporate obligations and other (2)                 |  |                | 55,539    |                      |   | 207                   |  |   | (930       | ) |  |   | 54,816   
|                                                    |  |                |           |                      |   |                       |  |   |            |   |  |   |          
|Total Securities Available for Sale                 |  | $              | 1,127,200 |                      | $ | 1,684                 |  | $ | (40,305    | ) |  | $ | 1,088,579
|                                                    |  |                |           |                      |   |                       |  |   |            |   |  |   |          
|December 31, 2005                                   |  |                |           |                      |   |                       |  |   |            |   |  |   |          
|Securities Available for Sale:                      |  |                |           |                      |   |                       |  |   |            |   |  |   |          
|U.S. Treasury                                       |  | $              | 5,008     |                      | $ |                      |  | $ | (91        | ) |  | $ | 4,917    
|U.S. Government sponsored enterprises (GSEs)        |  |                | 117,161   |                      |   | 43                    |  |   | (1,445     | ) |  |   | 115,759  
|GSEs and U.S. agency mortgage-backed securities (1) |  |                | 851,552   |                      |   | 788                   |  |   | (20,450    | ) |  |   | 831,890  
|State and political subdivisions                    |  |                | 166,051   |                      |   | 2,244                 |  |   | (1,114     | ) |  |   | 167,181  
|Corporate obligations and other (2)                 |  |                | 64,304    |                      |   | 56                    |  |   | (723       | ) |  |   | 63,637   
|                                                    |  |                |           |                      |   |                       |  |   |            |   |  |   |          
|Total Securities Available for Sale                 |  | $              | 1,204,076 |                      | $ | 3,131                 |  | $ | (23,823    | ) |  | $ | 1,183,384
|                                                    |  |                |           |                      |   |                       |  |   |            |   |  |   |          

A summary of unrealized loss information for investment securities, categorized by security type,
was as follows:



|                                                         |  |                     |         |                  |                     |        |            |       |                      |         |  |            |         |                  |  |   |         |  |   |         |  
|-------------------------------------------------------- |  | ------------------- | ------- | ---------------- | ------------------- | ------ | ---------- | ----- | -------------------- | ------- |  | ---------- | ------- | ---------------- |  | - | ------- |  | - | ------- | -
|                                                         |  | Less Than 12 Months |         |                  | 12 Months or Longer |        |            | Total |                     
|                                                         |  | Fair Value          |         | UnrealizedLosses |                     |        | Fair Value |       | UnrealizedLosses (3) |         |  | Fair Value |         | UnrealizedLosses | 
|                                                         |  | (in thousands)      |        
|June 30, 2006                                            |  |                     |         |                 
|Securities Available for Sale:                           |  |                     |         |                  |                     |        |            |       |                      |         |  |            |         |                  |  |   |         |  |   |         |  
|U.S. Treasury                                            |  | $                   |        |                  | $                   |       |            |       | $                    | 4,904   |  | $          | (101    | )                |  | $ | 4,904   |  | $ | (101    | )
|U.S. Government sponsored enterprises (GSEs)             |  |                     | 7,109   |                  |                     | (35    | )          |       |                      | 47,524  |  |            | (1,252  | )                |  |   | 54,633  |  |   | (1,287  | )
|GSEs and U.S. agency mortgage-backed securities (1)      |  |                     | 226,726 |                  |                     | (8,228 | )          |       |                      | 558,205 |  |            | (27,334 | )                |  |   | 784,931 |  |   | (35,562 | )
|State and political subdivisions                         |  |                     | 59,025  |                  |                     | (1,285 | )          |       |                      | 28,649  |  |            | (1,140  | )                |  |   | 87,674  |  |   | (2,425  | )
|Corporate obligations and other                          |  |                     | 13,493  |                  |                     | (251   | )          |       |                      | 11,139  |  |            | (679    | )                |  |   | 24,632  |  |   | (930    | )
|                                                         |  |                     |         |                  |                     |        |            |       |                      |         |  |            |         |                  |  |   |         |  |   |         |  
|Total Unrealized Losses on Securities Available for Sale |  | $                   | 306,353 |                  | $                   | (9,799 | )          |       | $                    | 650,421 |  | $          | (30,506 | )                |  | $ | 956,774 |  | $ | (40,305 | )
|                                                         |  |                     |         |                  |                     |        |            |       |                      |         |  |            |         |                  |  |   |         |  |   |         |  
|December 31, 2005                                        |  |                     |         |                 
|Securities Available for Sale:                           |  |                     |         |                  |                     |        |            |       |                      |         |  |            |         |                  |  |   |         |  |   |         |  
|U.S. Treasury                                            |  | $                   |        |                  | $                   |       |            |       | $                    | 4,917   |  | $          | (91     | )                |  | $ | 4,917   |  | $ | (91     | )
|U.S. Government sponsored enterprises (GSEs)             |  |                     | 37,357  |                  |                     | (491   | )          |       |                      | 63,773  |  |            | (954    | )                |  |   | 101,130 |  |   | (1,445  | )
|GSEs and U.S. agency mortgage-backed securities (1)      |  |                     | 362,303 |                  |                     | (6,281 | )          |       |                      | 434,655 |  |            | (14,169 | )                |  |   | 796,958 |  |   | (20,450 | )
|State and political subdivisions                         |  |                     | 54,991  |                  |                     | (787   | )          |       |                      | 11,218  |  |            | (327    | )                |  |   | 66,209  |  |   | (1,114  | )
|Corporate obligations and other                          |  |                     | 11,863  |                  |                     | (269   | )          |       |                      | 11,553  |  |            | (454    | )                |  |   | 23,416  |  |   | (723    | )
|                                                         |  |                     |         |                  |                     |        |            |       |                      |         |  |            |         |                  |  |   |         |  |   |         |  
|Total Unrealized Losses on Securities Available for Sale |  | $                   | 466,514 |                  | $                   | (7,828 | )          |       | $                    | 526,116 |  | $          | (15,995 | )                |  | $ | 992,630 |  | $ | (23,823 | )
|                                                         |  |                     |         |                  |                     |        |            |       |                      |         |  |            |         |                  |  |   |         |  |   |         |  



|(1) | Includes U.S. Government agencies.
|--- | ----------------------------------



|(2) | At June 30, 2006, includes investments of $4 million and $20 million, respectively, in stock of the Federal Reserve Bank (FRB) and the Federal Home Loan
Bank (FHLB). At December 31, 2005, these amounts were $4 million and $21 million, respectively. These investments are recorded at historical cost with income recorded when dividends are declared. A portion of the FRB and FHLB investments are
restricted as to sale because they are held to satisfy membership requirements.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | The Company has the ability to hold, and has no present intent to dispose of, the related securities as of June 30, 2006. The total $30.5 million of
unrealized losses related to 148 securities. None of the unrealized losses were individually significant to the total and, except as discussed below, the unrealized losses were caused by interest rate increases. Of the total, $27.3 million was
related to 94 mortgage-backed securities issued by GSEs with a quality rating of Aaa; $1.3 million related to seven Aaa rated GSEs; $101,000 related to one Aaa rated treasury note; and $1.1 million related to 44
municipal obligation bonds with quality ratings from A2 to Aaa. Corporate obligations and other included one asset-backed bond with an unrealized loss of $618,000 that had an average life of 4.7 years and was collateralized
by fixed rate manufactured housing contracts and installment loan agreements. The bond had a quality rating of B3 and was sufficiently collateralized such that credit loss was considered remote. The remaining $61,000 was an asset-backed
bond with an average life of 1.3 years and was collateralized by owner occupied first lien, conforming mortgage loans. This bond had a quality rating of Aaa and was sufficiently collateralized such that credit loss was considered remote.
In the event of prepayment, it is expected that the Company would recover substantially all of its recorded investment in both of these bonds.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

A summary of realized gain and loss information follows:



|                            |  |                |       |                 |   |      |                    |  |   |    
|--------------------------- |  | -------------- | ----- | --------------- | - | ---- | ------------------ |  | - | ---
|                            |  | Realized Gains |       | Realized Losses |   |      | Net Gains/(Losses)
|                            |  | (in thousands)
|For the three months ended: |  |                |       |                 |   |      |                    |  |   |    
|June 30, 2006               |  | $              |      |                 | $ |     |                    |  | $ |   
|June 30, 2005               |  |                | 460   |                 |   | (5   | )                  |  |   | 455
|                            |  |                |      
|For the six months ended:   |  |                |       |                 |   |      |                    |  |   |    
|June 30, 2006               |  | $              | 1,012 |                 | $ | (787 | )                  |  | $ | 225
|June 30, 2005               |  |                | 460   |                 |   | (56  | )                  |  |   | 404

At June 30, 2006 and 2005, securities with a fair value of approximately $768 million and
$912 million, respectively, were pledged to secure public deposits, securities under agreements to repurchase, derivative credit exposure and for other purposes required by law.



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NOTE 3 - LOANS AND ALLOWANCE FOR LOAN LOSSES

The composition of the loan portfolio at June 30, 2006 and December 31, 2005 was as follows:



|                                                                                                                       |  |                          |           |   |                  |   |           |  
|---------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | --------- | - | ---------------- | - | --------- | -
|                                                                                                                       |  | June 30,2006             |           |   | December 31,2005 |  
|                                                                                                                       |  | (in thousands)           |          
|Commercial, financial and agricultural                                                                                 |  | $                        | 839,769   |   |                  | $ | 818,657   |  
|Real estate-commercial                                                                                                 |  |                          | 1,884,979 |   |                  |   | 1,821,868 |  
|Real estate-residential                                                                                                |  |                          | 474,582   |   |                  |   | 459,823   |  
|Real estate-construction                                                                                               |  |                          | 351,138   |   |                  |   | 310,006   |  
|Installment and consumer                                                                                               |  |                          | 314,332   |   |                  |   | 311,497   |  
|Direct lease financing                                                                                                 |  |                          | 7         |   |                  |   | 13        |  
|                                                                                                                       |  |                          |           |   |                  |   |           |  
|Gross loans                                                                                                            |  | $                        | 3,864,807 |   |                  | $ | 3,721,864 |  
|Allowance for loan losses                                                                                              |  |                          | (40,560   | ) |                  |   | (40,756   | )
|                                                                                                                       |  |                          |           |   |                  |   |           |  
|Net Loans                                                                                                              |  | $                        | 3,824,247 |   |                  | $ | 3,681,108 |  
|                                                                                                                       |  |                          |           |   |                  |   |           |  
|An analysis of the allowance for loan losses for
the periods ended June 30, 2006 and June 30, 2005 is presented below: | 
|                                                                                                                       | 
|                                                                                                                       |  | For the Six Months Ended |          
|                                                                                                                       |  | June 30,2006             |           |   | June 30, 2005    |  
|                                                                                                                       |  | (in thousands)           |          
|Balance at beginning of year                                                                                           |  | $                        | 40,756    |   |                  | $ | 40,945    |  
|Provision charged to expense                                                                                           |  |                          | 4,250     |   |                  |   | 6,002     |  
|Loans charged off                                                                                                      |  |                          | (6,389    | ) |                  |   | (7,794    | )
|Recoveries on loans previously charged off                                                                             |  |                          | 1,943     |   |                  |   | 1,322     |  
|                                                                                                                       |  |                          |           |   |                  |   |           |  
|Balance at end of period                                                                                               |  | $                        | 40,560    |   |                  | $ | 40,475    |  
|                                                                                                                       |  |                          |           |   |                  |   |           |  



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NOTE 4  GOODWILL AND OTHER INTANGIBLE ASSETS

The Companys goodwill by segment at June 30, 2006 is as follows (in thousands):



|                                |  |   |      
|------------------------------- |  | - | -----
|Retail Banking                  |  | $ | 3,572
|Commercial Banking              |  |   | 2,381
|Investment Management and Trust |  |   | 195  
|                                |  |   |      
|Total Goodwill                  |  | $ | 6,148
|                                |  |   |      

There were no changes in the carrying amount of goodwill for the six months ended June 30,
2006.

The Originated Mortgage Servicing Right (OMSR) asset values, which are recorded in Other Assets on the Consolidated Balance Sheets
are included in the Mortgage Banking Segment, are as follows:



|                                              |  |                |         |   |                  |   |         |  
|--------------------------------------------- |  | -------------- | ------- | - | ---------------- | - | ------- | -
|                                              |  | June 30,2006   |         |   | December 31,2005 |  
|                                              |  | (in thousands) |        
|Unamortized Cost of Mortgage Servicing Rights |  |                |         |   |                  |   |         |  
|Gross Carrying Amount                         |  | $              | 41,595  |   |                  | $ | 39,763  |  
|Less: Accumulated Amortization                |  |                | (27,682 | ) |                  |   | (26,488 | )
|Less: OMSR Valuation Allowance                |  |                |        |   |                  |   |        |  
|                                              |  |                |         |   |                  |   |         |  
|Net OMSR at end of period                     |  | $              | 13,913  |   |                  | $ | 13,275  |  
|                                              |  |                |         |   |                  |   |         |  
|Fair value of OMSRs                           |  | $              | 17,112  |   |                  | $ | 16,064  |  
|                                              |  |                |         |   |                  |   |         |  
|                                              |  |                |         |   |                  |   |         |  
|OMSR Valuation Allowance                      |  |                |         |   |                  |   |         |  
|Balance at beginning of year                  |  | $              |        |   |                  | $ | 53      |  
|Net impairment valuation credited to income   |  |                |        |   |                  |   | (53     | )
|                                              |  |                |         |   |                  |   |         |  
|Balance at end of period                      |  | $              |        |   |                  | $ |        |  
|                                              |  |                |         |   |                  |   |         |  

The current and estimated OMSR amortization expense on the Companys OMSR asset are as
follows (in thousands):



|                                      |  |   |       
|------------------------------------- |  | - | ------
|Aggregate Amortization Expense        |  |   |       
|For Quarter Ended 6/30/06             |  | $ | 663   
|For Six Months Ended 6/30/06          |  |   | 1,195 
|                                      | 
|Estimated Amortization Expense        |  |   |       
|For Remainder of Year Ending 12/31/06 |  | $ | 1,252 
|For Year Ending 12/31/07              |  |   | 2,453 
|For Year Ending 12/31/08              |  |   | 2,131 
|For Year Ending 12/31/09              |  |   | 1,807 
|For Year Ending 12/31/10              |  |   | 1,513 
|For Year Ending 12/31/11              |  |   | 1,243 
|Thereafter                            |  |   | 3,514 
|                                      |  |   |       
|Total                                 |  | $ | 13,913
|                                      |  |   |       

The weighted-average amortization period for OMSR retained during the second quarter of 2006 was
11.9 years. The unpaid principal balance of mortgage loans serviced for others, plus mortgage loans held for sale, was $1.4 billion as of both June 30, 2006 and December 31, 2005, and $1.3 billion as of June 30, 2005.



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NOTE 5 SALE OF RECEIVABLES

The Company periodically sells certain indirect automobile loans in securitization transactions. Upon sale, the net carrying amount of the loans is removed from the consolidated balance sheet in
exchange for cash and certain retained residual interests. The retained interests includes rights to service the loans that were sold (the Servicing Rights) and an interest in residual cash flows (the Interest-Only Strip).
The Interest-Only Strip includes the excess of interest collected on the loans over the amount required to be paid to the investors and the securitization agent (the Excess Spread) plus an interest in sales proceeds that were not
remitted by the securitization trust at the time of the initial sale of the loans to the extent it exceeds projected credit losses (the Credit Enhancement or Overcollateralization). There were no sales of indirect automobile
loans during the first two quarters of 2006 or 2005.

The Company receives monthly servicing fees equal to 0.75 percent per annum of the
outstanding beginning principal balance of the loans serviced for the month and rights to future cash flows arising after the investors in the securitization trust have received the returns for which they have contracted. The Companys retained
interests are subordinate to investor's interests. The value of the Interest-Only Strip is subject to prepayment risk and interest rate risk on the Excess Spread and credit risk on the transferred automobile loans on the Overcollateralization. The
Company's risk of loss attributable to prepayment and credit risk is limited to its interest in the Interest-Only Strip. Neither the investors nor the securization trust have any further recourse to the Company's other assets. Interest rate risk
could exceed the Company's interest in the Excess Spread, but such a possibility is not considered probable as of June 30, 2006.

Key
economic assumptions used in measuring the retained interests as of June 30, 2006, including the sensitivity of the current fair value of residual cash flows to immediate 10 percent and 20 percent adverse changes in those assumptions, are as
follows:



|                                             |  |                     |       |   |                  |   |       |                  |  |   |       |  
|-------------------------------------------- |  | ------------------- | ----- | - | ---------------- | - | ----- | ---------------- |  | - | ----- | -
|                                             |  | As of June 30, 2006 |      
|                                             |  | Actual              |       |   | 10%AdverseChange |   |       | 20%AdverseChange | 
|                                             |  | (in thousands)      |      
|Prepayment speed assumptions                 |  |                     |       |   |                  |   |       |                  |  |   |       |  
|Prepayment speed                             |  |                     | 2.25  | % |                  |   | 2.48  | %                |  |   | 2.7   | %
|Weighted average life (in months)            |  |                     | 11.6  |   |                  |   | 11.3  |                  |  |   | 10.8  |  
|Fair value of retained interests             |  | $                   | 5,318 |   |                  | $ | 5,316 |                  |  | $ | 5,345 |  
|Change in fair value                         |  | $                   |      |   |                  | $ | (2    | )                |  | $ | 27    |  
|Expected credit loss assumptions             |  |                     |       |   |                  |   |       |                  |  |   |       |  
|Expected credit losses (loss to liquidation) |  |                     | 0.56  | % |                  |   | 0.62  | %                |  |   | 0.67  | %
|Fair value of retained interests             |  | $                   | 5,318 |   |                  | $ | 5,279 |                  |  | $ | 5,240 |  
|Change in fair value                         |  | $                   |      |   |                  | $ | (39   | )                |  | $ | (78   | )
|Residual cash flow discount rate assumptions |  |                     |       |   |                  |   |       |                  |  |   |       |  
|Residual cash flow discount rate (annual)    |  |                     | 14.3  | % |                  |   | 15.7  | %                |  |   | 17.2  | %
|Fair value of retained interests             |  | $                   | 5,318 |   |                  | $ | 5,221 |                  |  | $ | 5,127 |  
|Change in fair value                         |  | $                   |      |   |                  | $ | (97   | )                |  | $ | (191  | )
|Interest rate assumptions                    |  |                     |       |   |                  |   |       |                  |  |   |       |  
|Weighted average forward rate (annual)       |  |                     | 5.0   | % |                  |   | 5.5   | %                |  |   | 6.0   | %
|Fair value of retained interests             |  | $                   | 5,318 |   |                  | $ | 4,978 |                  |  | $ | 4,605 |  
|Change in fair value                         |  | $                   |      |   |                  | $ | (340  | )                |  | $ | (713  | )

These sensitivities are hypothetical and should be used with caution. Changes in fair value based
on a 10 percent variation should not be extrapolated because the relationship of the change in assumption to the change in fair value may not always be linear. Also, in this table, the effect of a variation in a particular assumption on the fair
value of the retained interests is calculated without changing any other assumption; in reality, changes in one factor may result in changes in another (for example, increases in market interest rates may result in lower prepayments and increased
credit losses), which might magnify or counteract the sensitivities.



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Total cash flows attributable to the indirect automobile loan securitization transactions was an inflow
of $1.7 and $3.4 million for the second quarters of 2006 and 2005, respectively. The following table summarizes the various cash flows received from and paid to the securitization trust:



|                                                      |  |                             |   |                         |   |                 |  |           |       |  |   |  
|----------------------------------------------------- |  | --------------------------- | - | ----------------------- | - | --------------- |  | --------- | ----- |  | - | -
|                                                      |  | Proceeds FromSecuritization |   | Servicing FeesCollected |   | Other CashFlows |  | Fees Paid
|                                                      |  | (in thousands)             
|Cash flows received from trust in second quarter 2006 |  | $                           |  |                         | $ | 181             |  | $         | 1,528 |  | $ | 
|Cash flows received from trust in second quarter 2005 |  | $                           |  |                         | $ | 329             |  | $         | 3,028 |  | $ | 

Other cash flows include, for example, gross cash flows from Interest-Only Strips, net of
reductions in such cash flows for loan defaults, including the release of excess Overcollateralization funds.

The following table presents
quantitative information about delinquencies (loans 30 or more days past due plus non-accruals), net credit losses, and components of securitized indirect automobile loans and other assets managed together with them. Loan amounts represent the
principal amount of the loan only. Retained interests held for securitized assets are excluded from this table because they are recognized separately.



|                  |  |                                 |         |                                     |   |                   |  |      |       |      |   |       |  |   |     |  |   |      
|----------------- |  | ------------------------------- | ------- | ----------------------------------- | - | ----------------- |  | ---- | ----- | ---- | - | ----- |  | - | --- |  | - | -----
|                  |  | Total Principal Amount of Loans |         | Principal Amount ofDelinquent Loans |   | Net Credit Losses
|                  |  | As of June 30                   |         | Year-to-Date                       
|                  |  | (in thousands)                 
|                  |  | 2006                            |         | 2005                                |   | 2006              |  | 2005 |       | 2006 |   | 2005 
|Held in portfolio |  | $                               | 253,300 |                                     | $ | 245,730           |  | $    | 2,368 |      | $ | 3,328 |  | $ | 442 |  | $ | 796  
|Securitized       |  |                                 | 79,192  |                                     |   | 148,937           |  |      | 1,817 |      |   | 3,266 |  |   | 554 |  |   | 1,041
|                  |  |                                 |         |                                     |   |                   |  |      |       |      |   |       |  |   |     |  |   |      
|Total             |  | $                               | 332,492 |                                     | $ | 394,667           |  | $    | 4,185 |      | $ | 6,594 |  | $ | 996 |  | $ | 1,837
|                  |  |                                 |         |                                     |   |                   |  |      |       |      |   |       |  |   |     |  |   |      

Actual and projected static pool credit losses, as a percentage of indirect automobile loans
securitized are 1.70%, 1.79% and 1.80% as of the quarters ended June 30, 2006, 2007, and 2008, respectively. Static pool losses are calculated by summing the actual and projected future credit losses and dividing them by the original balance of
each pool of assets. The amounts shown here for each year are a weighted average for all indirect automobile loan securitizations.



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NOTE 6 - SHORT-TERM BORROWINGS

Short-term borrowings consisted of the following at June 30, 2006 and December 31, 2005:



|                                                 |  |                |         |                  |   |        
|------------------------------------------------ |  | -------------- | ------- | ---------------- | - | -------
|                                                 |  | June 30,2006   |         | December 31,2005
|                                                 |  | (in thousands)
|Securities sold under agreements to repurchase   |  | $              | 244,591 |                  | $ | 410,089
|Federal Home Loan Bank borrowings                |  |                | 62,826  |                  |   | 16,711 
|Federal funds purchased                          |  |                | 82,400  |                  |   | 50,278 
|U.S. Treasury tax and loan note accounts         |  |                | 8,039   |                  |   | 10,245 
|Commercial paper and other short-term borrowings |  |                | 15      |                  |   | 2,011  
|                                                 |  |                |         |                  |   |        
|Total Short-Term Borrowings                      |  | $              | 397,871 |                  | $ | 489,334
|                                                 |  |                |         |                  |   |        

NOTE 7 - LONG-TERM BORROWINGS

Long-term borrowings consisted of the following at June 30, 2006 and December 31, 2005:



|                                  |  |                |         |                  |   |        
|--------------------------------- |  | -------------- | ------- | ---------------- | - | -------
|                                  |  | June 30,2006   |         | December 31,2005
|                                  |  | (in thousands)
|Federal Home Loan Bank borrowings |  | $              | 323,300 |                  | $ | 127,444
|AMCORE Capital Trust I borrowings |  |                | 41,238  |                  |   | 41,238 
|Capitalized lease obligation      |  |                | 1,041   |                  |   | 1,048  
|                                  |  |                |         |                  |   |        
|Total Long-Term Borrowings        |  | $              | 365,579 |                  | $ | 169,730
|                                  |  |                |         |                  |   |        

The Company periodically borrows additional funds from the Federal Home Loan Bank (FHLB) in
connection with the purchase of mortgage-backed securities and the financing of eligible family real estate loans. The average stated maturity of these borrowings at June 30, 2006 is 2.4 years, with a weighted average borrowing rate of 4.87%.
Certain fixed-rate FHLB borrowings have prepayment penalties and call or conversion to floating-rate features associated with them. FHLB borrowings of $77 million have call or conversion features which have the potential to be exercised by FHLB in
2006. Mortgage-related assets with a carrying value of $397 million were held as collateral for FHLB borrowings at June 30, 2006.

Other long-term borrowings include a capital lease with a net carrying value of $1.0 million on a branch facility leased by the Company. The Company is amortizing the capitalized lease obligation and depreciating the facility over the
remaining non-cancellable term of the original lease, which expires or renews in 2021.

The Company reclassifies borrowings to short-term
borrowings when the remaining maturity becomes less than one year. Scheduled reductions of long-term borrowings are as follows:



|                           |  |                |        
|-------------------------- |  | -------------- | -------
|                           |  | Total         
|                           |  | (in thousands)
|2007                       |  | $              | 14     
|2008                       |  |                | 217,432
|2009                       |  |                | 78,913 
|2010                       |  |                | 444    
|2011                       |  |                | 25,036 
|Thereafter                 |  |                | 43,740 
|                           |  |                |        
|Total Long-Term Borrowings |  | $              | 365,579
|                           |  |                |        



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NOTE 8  DERIVATIVE INSTRUMENTS

The Company uses derivatives to manage its risk or exposure to changes in interest rates and in conjunction with its mortgage banking operations. The derivatives currently used include interest
rate swaps and mortgage loan commitments and forward contracts. Interest rate swaps are used by the Company to convert fixed-rate assets or liabilities to floating-rate assets or liabilities (fair value Hedges). The Company has also used interest
rate swaps to convert assets or liabilities with variable-rate cash flows to assets or liabilities with fixed-rate cash flows (cash flow Hedges).

The following derivative related activity is included in other non-interest income or miscellaneous other expense in the Consolidated Statements of Income, for the periods ended:



|                                                |  |                                    |     |   |                                  |   |     |      |  |      |     |  |   |    |  
|----------------------------------------------- |  | ---------------------------------- | --- | - | -------------------------------- | - | --- | ---- |  | ---- | --- |  | - | -- | -
|                                                |  | For the Three MonthsEnded June 30, |     |   | For the Six MonthsEnded June 30, |  
|                                                |  | 2006                               |     |   | 2005                             |   |     | 2006 |  | 2005 |    
|                                                |  | (in thousands)                     |    
|Changes in Value:                               |  |                                    |     |   |                                  |   |     |      |  |      |     |  |   |    |  
|Derivatives not qualifying for Hedge accounting |  | $                                  | 569 |   |                                  | $ | 7   |      |  | $    | 208 |  | $ | (6 | )
|Ineffective portion of fair value Hedges        |  |                                    | (21 | ) |                                  |   | (45 | )    |  |      | 2   |  |   | (1 | )
|Mortgage loan derivatives                       |  |                                    | 80  |   |                                  |   | 88  |      |  |      | 85  |  |   | 25 |  
|                                                |  |                                    |     |   |                                  |   |     |      |  |      |     |  |   |    |  
|Total                                           |  | $                                  | 628 |   |                                  | $ | 50  |      |  | $    | 295 |  | $ | 18 |  
|                                                |  |                                    |     |   |                                  |   |     |      |  |      |     |  |   |    |  

In first quarter 2004, the Company terminated two fair value Hedges of FHLB borrowings with a
combined notional amount of $74 million, which resulted in a gain of $690,000. The gain continued to be classified as long-term debt and is being amortized over the remaining terms of the FHLB borrowings. The unrealized gain was $283,000 and
$462,000 at June 30, 2006 and 2005, respectively. In first quarter 2006, the Company terminated two fair value Hedges of FHLB borrowings with a combined notional amount of $74 million, which resulted in a loss of $2.9 million. The loss
continued to be classified as long-term debt and is being amortized over the remaining terms of the FHLB borrowings. The unrealized loss was $2.5 million at June 30, 2006.

NOTE 9  CONTINGENCIES AND GUARANTEES

Contingencies:

Management believes that no litigation is threatened or pending in which the Company faces potential loss or exposure which will materially affect the
Companys consolidated financial position or consolidated results of operations. Since the Companys subsidiaries act as depositories of funds, trustee and escrow agents, they occasionally are named as defendants in lawsuits involving
claims to the ownership of funds in particular accounts. This and other litigation is incidental to the Companys business.

Guarantees:

The Companys subsidiary AMCORE Bank, N.A. (Bank), as a provider of financial services, routinely enters
into commitments to extend credit to its customers, including financial and performance standby letters of credit. Financial and performance standby letters of credit are a conditional but irrevocable form of guarantee. Under a financial standby
letter of credit, the Company guarantees payment to a third party obligee upon the default of payment by the Bank customer, and upon receipt of complying documentation from the obligee. Under a performance standby letter of credit, the Company
guarantees payment to a third party obligee upon nonperformance by the Bank customer and upon receipt of complying documentation from the obligee.

Both financial and performance standby letters of credit are typically issued for a period of one year to five years, but can be extended depending on the Bank customers needs. As of June 30, 2006, the maximum remaining term for
any outstanding standby letters of credit expires on October 15, 2011.

A fee is normally charged to compensate the Bank for the value
of the guarantees that are granted to the customer. The fees are deferred and recognized as income over the term of the guarantee. As of June 30, 2006, the carrying value of these deferrals was a deferred credit of $1.1 million. This amount
included a $276,000 guarantee liability for financial and performance standby letters of credit recorded in accordance with Financial Interpretation No. (FIN) 45, Guarantors Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others. The remaining $826,000 represented deferred fees charged for letters of credit exempted from the scope of FIN 45.

At June 30, 2006 the contractual amount of all financial and performance standby letters of credit, including those exempted from FIN 45, was $150.2 million and $64.7 million, respectively.
These represent the maximum potential amount of future payments that the Company would be obligated to pay under the guarantees.



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The issuance of either a financial or performance standby letter of credit is generally backed by
collateral. The collateral can take various forms including, but not limited to, bank accounts, investments, fixed assets, inventory, accounts receivable and real estate. At the time that the letters of credit are issued, the value of the collateral
is usually in an amount that is considered sufficient to cover the contractual amount of the standby letter of credit.

In addition to the
guarantee liability and deferred fees described above, the Company has recorded a $963,000 contingent liability for estimated probable losses on unfunded loan commitments and letters of credit outstanding as of June 30, 2006. Prior to the third
quarter 2005, this liability was included as part of the Companys Allowance for Loan Losses.

NOTE 10  EARNINGS PER SHARE

Earnings per share (EPS) calculations are as follows:



|                                               |  |                                       |        |   |                                   |   |        |      |  |   |        |   |  |   |        |  
|---------------------------------------------- |  | ------------------------------------- | ------ | - | --------------------------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                               |  | For the Three Months Ended June 30,   |        |   | For the Six Months Ended June 30, |  
|                                               |  | 2006                                  |        |   | 2005                              |   |        | 2006 |  |   | 2005   |  
|                                               |  | (in thousands, except per share data) |       
|Numerator                                      |  |                                       |        |   |                                   |   |        |      |  |   |        |   |  |   |        |  
|Income from continuing operations              |  | $                                     | 11,434 |   |                                   | $ | 12,163 |      |  | $ | 21,893 |   |  | $ | 24,291 |  
|Loss from discontinued operations, net of tax  |  |                                       | (11    | ) |                                   |   | (6     | )    |  |   | (80    | ) |  |   | (84    | )
|                                               |  |                                       |        |   |                                   |   |        |      |  |   |        |   |  |   |        |  
|Net income                                     |  | $                                     | 11,423 |   |                                   | $ | 12,157 |      |  | $ | 21,813 |   |  | $ | 24,207 |  
|                                               |  |                                       |        |   |                                   |   |        |      |  |   |        |   |  |   |        |  
|Denominator                                    |  |                                       |        |   |                                   |   |        |      |  |   |        |   |  |   |        |  
|Average number of shares outstanding  basic   |  |                                       | 24,668 |   |                                   |   | 24,805 |      |  |   | 24,739 |   |  |   | 24,805 |  
|Plus: Diluted potential common shares          |  |                                       | 35     |   |                                   |   | 179    |      |  |   | 62     |   |  |   | 203    |  
|Contingently issuable shares                   |  |                                       | 55     |   |                                   |   | 36     |      |  |   | 55     |   |  |   | 36     |  
|                                               |  |                                       |        |   |                                   |   |        |      |  |   |        |   |  |   |        |  
|Average number of shares outstanding  diluted |  |                                       | 24,758 |   |                                   |   | 25,020 |      |  |   | 24,856 |   |  |   | 25,044 |  
|                                               |  |                                       |        |   |                                   |   |        |      |  |   |        |   |  |   |        |  
|Earnings per share from continuing operations  |  |                                       |        |   |                                   |   |        |      |  |   |        |   |  |   |        |  
|Basic                                          |  | $                                     | 0.46   |   |                                   | $ | 0.49   |      |  | $ | 0.88   |   |  | $ | 0.98   |  
|Diluted                                        |  |                                       | 0.46   |   |                                   |   | 0.49   |      |  |   | 0.88   |   |  |   | 0.97   |  
|Loss per share from discontinued operations    |  |                                       |        |   |                                   |   |        |      |  |   |        |   |  |   |        |  
|Basic                                          |  |                                       | 0.00   |   |                                   |   | 0.00   |      |  |   | 0.00   |   |  |   | 0.00   |  
|Diluted                                        |  |                                       | 0.00   |   |                                   |   | 0.00   |      |  |   | 0.00   |   |  |   | 0.00   |  
|Earnings per share                             |  |                                       |        |   |                                   |   |        |      |  |   |        |   |  |   |        |  
|Basic                                          |  |                                       | 0.46   |   |                                   |   | 0.49   |      |  |   | 0.88   |   |  |   | 0.98   |  
|Diluted                                        |  |                                       | 0.46   |   |                                   |   | 0.49   |      |  |   | 0.88   |   |  |   | 0.97   |  

As prescribed by SFAS No. 128, Earnings Per Share, basic EPS is computed by
dividing net income available to common stockholders (numerator) by the weighted-average number of common shares outstanding (denominator) during the period. Shares issued during the period and shares reacquired during the period are weighted for
the portion of the period they were outstanding.

The computation of diluted EPS is similar to the computation of basic EPS except that the
denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued and to include shares contingently issuable pursuant to employee incentive plans.
Securities (e.g. options) that do not have a current right to participate fully in earnings, but that may do so in the future by virtue of their option rights, are potentially dilutive shares. The dilutive shares are calculated based on the treasury
stock method. In computing diluted EPS, only potential common shares that are dilutivethose that reduce earnings per share or increase loss per shareare included. Exercise of options is not assumed if the result would be antidilutive.



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NOTE 11 - SEGMENT INFORMATION

AMCOREs internal reporting and planning process focuses on its four primary lines of business (Segment(s)): Commercial Banking, Retail Banking, Investment Management and Trust, and Mortgage
Banking. The financial information presented was derived from the Companys internal profitability reporting system that is used by management to monitor and manage the financial performance of the Company. This information is based on internal
management accounting policies which have been developed to reflect the underlying economics of the Segments and, to the extent practicable, to portray each Segment as if it operated on a stand-alone basis. Thus, each Segment, in addition to its
direct revenues, expenses, assets and liabilities, includes an appropriate allocation of shared support function expenses. The Commercial, Retail and Mortgage Banking Segments also include fund transfer adjustments to appropriately reflect the cost
of funds on loans made and funding credits on deposits generated. Apart from these adjustments, the accounting policies used are similar to those described in Note 1 of the Notes to Consolidated Financial Statements in the Companys Form 10-K
for the year ended December 31, 2005.

Since there are no comprehensive authorities for management accounting equivalent to U.S.
generally accepted accounting principles, the information presented may not necessarily be comparable with similar information from other financial institutions. In addition, methodologies used to measure, assign and allocate certain items may
change from time-to-time to reflect, among other things, accounting estimate refinements, changes in risk profiles, changes in customers or product lines, and changes in management structure.

Total Segment results differ from consolidated results primarily due to inter-segment eliminations, certain corporate administration costs, items not otherwise allocated in the management
accounting process and treasury and investment activities. The impact of these items is aggregated to reconcile the amounts presented for the Segments to the consolidated results and is included in the Other column. On December 30,
2005, the Company completed the sale of Investors Management Group, Ltd, (IMG). The results of IMG for the current and prior periods have been presented in discontinued operations.

The Commercial Banking Segment provides commercial banking services including lending, business checking and deposits, treasury management and other traditional as well as electronic commerce
services to middle market and small business customers through the BANKs full-service and limited branch office (LBO) locations. The Retail Banking Segment provides retail banking services including direct and indirect lending, checking,
savings, money market and certificate of deposit (CD) accounts, safe deposit rental, automated teller machines and other traditional and electronic commerce services to individual customers through the BANKs branch locations. The Investment
Management and Trust segment provides its clients with wealth management services, which include trust services, investment management, estate administration, financial planning, and employee benefit plan administration and recordkeeping services.
The Mortgage Banking segment provides a variety of mortgage lending products to meet its customer needs. It sells a majority of the long-term fixed-rate loans to the secondary market and continues to service most of the loans sold.



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For the three months ended June 30, 2006



|                                                             |  |                        |           |   |               |   |         |                               |  |   |                 |   |  |       |         |   |              |   |           |   |  |   |           |  
|------------------------------------------------------------ |  | ---------------------- | --------- | - | ------------- | - | ------- | ----------------------------- |  | - | --------------- | - |  | ----- | ------- | - | ------------ | - | --------- | - |  | - | --------- | -
|                                                             |  | Operating Segments     |           |   |               |   |         |                               | 
|                                                             |  | CommercialBanking      |           |   | RetailBanking |   |         | InvestmentManagement andTrust |  |   | MortgageBanking |   |  | Other |         |   | Consolidated |  
|                                                             |  | (dollars in thousands) |          
|Net interest income                                          |  | $                      | 26,549    |   |               | $ | 13,428  |                               |  | $ | 93              |   |  | $     | 1,017   |   |              | $ | 233       |   |  | $ | 41,320    |  
|Non-interest income                                          |  |                        | 2,117     |   |               |   | 5,667   |                               |  |   | 4,827           |   |  |       | 981     |   |              |   | 3,874     |   |  |   | 17,466    |  
|                                                             |  |                        |           |   |               |   |         |                               |  |   |                 |   |  |       |         |   |              |   |           |   |  |   |           |  
|Total revenue                                                |  |                        | 28,666    |   |               |   | 19,095  |                               |  |   | 4,920           |   |  |       | 1,998   |   |              |   | 4,107     |   |  |   | 58,786    |  
|Provision for loan losses                                    |  |                        | 1,349     |   |               |   | 872     |                               |  |   |                |   |  |       | 29      |   |              |   |          |   |  |   | 2,250     |  
|Depreciation and amortization                                |  |                        | 212       |   |               |   | 666     |                               |  |   | 26              |   |  |       | 80      |   |              |   | 780       |   |  |   | 1,764     |  
|Other non-interest expense                                   |  |                        | 14,161    |   |               |   | 12,429  |                               |  |   | 4,388           |   |  |       | 1,972   |   |              |   | 5,544     |   |  |   | 38,494    |  
|                                                             |  |                        |           |   |               |   |         |                               |  |   |                 |   |  |       |         |   |              |   |           |   |  |   |           |  
|Income (loss) from continuing operations before income taxes |  | $                      | 12,944    |   |               | $ | 5,128   |                               |  | $ | 506             |   |  | $     | (83     | ) |              | $ | (2,217    | ) |  | $ | 16,278    |  
|Income taxes (benefit)                                       |  |                        | 5,048     |   |               |   | 2,000   |                               |  |   | 210             |   |  |       | (32     | ) |              |   | (2,382    | ) |  |   | 4,844     |  
|                                                             |  |                        |           |   |               |   |         |                               |  |   |                 |   |  |       |         |   |              |   |           |   |  |   |           |  
|Income (loss) from continuing operations                     |  | $                      | 7,896     |   |               | $ | 3,128   |                               |  | $ | 296             |   |  | $     | (51     | ) |              | $ | 165       |   |  | $ | 11,434    |  
|                                                             |  |                        |           |   |               |   |         |                               |  |   |                 |   |  |       |         |   |              |   |           |   |  |   |           |  
|Discontinued operations:                                     |  |                        |           |   |               |   |         |                               |  |   |                 |   |  |       |         |   |              |   |           |   |  |   |           |  
|Loss from discontinued operations                            |  |                        |          |   |               |   |        |                               |  |   | (18             | ) |  |       |        |   |              |   |          |   |  |   | (18       | )
|Income tax benefit                                           |  |                        |          |   |               |   |        |                               |  |   | (7              | ) |  |       |        |   |              |   |          |   |  |   | (7        | )
|                                                             |  |                        |           |   |               |   |         |                               |  |   |                 |   |  |       |         |   |              |   |           |   |  |   |           |  
|Loss from discontinued operations                            |  | $                      |          |   |               | $ |        |                               |  | $ | (11             | ) |  | $     |        |   |              | $ |          |   |  | $ | (11       | )
|                                                             |  |                        |           |   |               |   |         |                               |  |   |                 |   |  |       |         |   |              |   |           |   |  |   |           |  
|Net Income (Loss)                                            |  | $                      | 7,896     |   |               | $ | 3,128   |                               |  | $ | 285             |   |  | $     | (51     | ) |              | $ | 165       |   |  | $ | 11,423    |  
|                                                             |  |                        |           |   |               |   |         |                               |  |   |                 |   |  |       |         |   |              |   |           |   |  |   |           |  
|Segment profit percentage (continuing operations)            |  |                        | 70        | % |               |   | 28      | %                             |  |   | 2               | % |  |       | 0       | % |              |   | N/A       |   |  |   | 100       | %
|                                                             |  |                        |           |   |               |   |         |                               |  |   |                 |   |  |       |         |   |              |   |           |   |  |   |           |  
|For the three months ended June 30, 2005                     |  |                        |           |   |               |   |         |                               |  |   |                 |   |  |       |         |   |              |   |           |   |  |   |           |  
|Net interest income                                          |  | $                      | 24,786    |   |               | $ | 11,710  |                               |  | $ | 20              |   |  | $     | 1,135   |   |              | $ | 2,244     |   |  | $ | 39,895    |  
|Non-interest income                                          |  |                        | 1,976     |   |               |   | 4,926   |                               |  |   | 4,697           |   |  |       | 509     |   |              |   | 3,812     |   |  |   | 15,920    |  
|                                                             |  |                        |           |   |               |   |         |                               |  |   |                 |   |  |       |         |   |              |   |           |   |  |   |           |  
|Total revenue                                                |  |                        | 26,762    |   |               |   | 16,636  |                               |  |   | 4,717           |   |  |       | 1,644   |   |              |   | 6,056     |   |  |   | 55,815    |  
|Provision for loan losses                                    |  |                        | 2,399     |   |               |   | 565     |                               |  |   |                |   |  |       | 538     |   |              |   |          |   |  |   | 3,502     |  
|Depreciation and amortization                                |  |                        | 176       |   |               |   | 734     |                               |  |   | 71              |   |  |       | 75      |   |              |   | 1,023     |   |  |   | 2,079     |  
|Other non-interest expense                                   |  |                        | 11,695    |   |               |   | 11,059  |                               |  |   | 4,039           |   |  |       | 1,841   |   |              |   | 4,689     |   |  |   | 33,323    |  
|                                                             |  |                        |           |   |               |   |         |                               |  |   |                 |   |  |       |         |   |              |   |           |   |  |   |           |  
|Income (loss) from continuing operations before income taxes |  |                        | 12,492    |   |               |   | 4,278   |                               |  |   | 607             |   |  |       | (810    | ) |              |   | 344       |   |  |   | 16,911    |  
|Income taxes (benefit)                                       |  |                        | 4,872     |   |               |   | 1,668   |                               |  |   | 250             |   |  |       | (316    | ) |              |   | (1,726    | ) |  |   | 4,748     |  
|                                                             |  |                        |           |   |               |   |         |                               |  |   |                 |   |  |       |         |   |              |   |           |   |  |   |           |  
|Income (loss) from continuing operations                     |  | $                      | 7,620     |   |               | $ | 2,610   |                               |  | $ | 357             |   |  | $     | (494    | ) |              | $ | 2,070     |   |  | $ | 12,163    |  
|                                                             |  |                        |           |   |               |   |         |                               |  |   |                 |   |  |       |         |   |              |   |           |   |  |   |           |  
|Discontinued operations:                                     |  |                        |           |   |               |   |         |                               |  |   |                 |   |  |       |         |   |              |   |           |   |  |   |           |  
|Income from discontinued operations                          |  |                        |          |   |               |   |        |                               |  |   | 5               |   |  |       |        |   |              |   |          |   |  |   | 5         |  
|Income taxes                                                 |  |                        |          |   |               |   |        |                               |  |   | 11              |   |  |       |        |   |              |   |          |   |  |   | 11        |  
|                                                             |  |                        |           |   |               |   |         |                               |  |   |                 |   |  |       |         |   |              |   |           |   |  |   |           |  
|Income (loss) from discontinued operations                   |  | $                      |          |   |               | $ |        |                               |  | $ | (6              | ) |  | $     |        |   |              | $ |          |   |  | $ | (6        | )
|                                                             |  |                        |           |   |               |   |         |                               |  |   |                 |   |  |       |         |   |              |   |           |   |  |   |           |  
|Net Income (loss)                                            |  | $                      | 7,620     |   |               | $ | 2,610   |                               |  | $ | 351             |   |  | $     | (494    | ) |              | $ | 2,070     |   |  | $ | 12,157    |  
|                                                             |  |                        |           |   |               |   |         |                               |  |   |                 |   |  |       |         |   |              |   |           |   |  |   |           |  
|Segment profit percentage (continuing operations)            |  |                        | 75        | % |               |   | 26      | %                             |  |   | 4               | % |  |       | -5      | % |              |   | N/A       |   |  |   | 100       | %
|                                                             |  |                        |           |   |               |   |         |                               |  |   |                 |   |  |       |         |   |              |   |           |   |  |   |           |  
|                                                             |  |                        |           |   |               |  
|For the six months ended June 30, 2006                       |  |                        |           |   |               |   |         |                               |  |   |                 |   |  |       |         |   |              |   |           |   |  |   |           |  
|                                                             |  |                        |          
|                                                             |  | Operating Segments     |           |   |               |   |         |                               | 
|                                                             |  | CommercialBanking      |           |   | RetailBanking |   |         | InvestmentManagement andTrust |  |   | MortgageBanking |   |  | Other |         |   | Consolidated |  
|                                                             |  | (dollars in thousands) |          
|Net interest income                                          |  | $                      | 52,719    |   |               | $ | 26,442  |                               |  | $ | 201             |   |  | $     | 1,949   |   |              | $ | 1,439     |   |  | $ | 82,750    |  
|Non-interest income                                          |  |                        | 4,120     |   |               |   | 10,350  |                               |  |   | 9,513           |   |  |       | 2,144   |   |              |   | 7,038     |   |  |   | 33,165    |  
|                                                             |  |                        |           |   |               |   |         |                               |  |   |                 |   |  |       |         |   |              |   |           |   |  |   |           |  
|Total revenue                                                |  |                        | 56,839    |   |               |   | 36,792  |                               |  |   | 9,714           |   |  |       | 4,093   |   |              |   | 8,477     |   |  |   | 115,915   |  
|Provision for loan losses                                    |  |                        | 2,878     |   |               |   | 1,350   |                               |  |   |                |   |  |       | 22      |   |              |   |          |   |  |   | 4,250     |  
|Depreciation and amortization                                |  |                        | 405       |   |               |   | 1,288   |                               |  |   | 40              |   |  |       | 157     |   |              |   | 1,613     |   |  |   | 3,503     |  
|Other non-interest expense                                   |  |                        | 27,682    |   |               |   | 25,585  |                               |  |   | 9,056           |   |  |       | 4,068   |   |              |   | 10,754    |   |  |   | 77,145    |  
|                                                             |  |                        |           |   |               |   |         |                               |  |   |                 |   |  |       |         |   |              |   |           |   |  |   |           |  
|Income (loss) from continuing operations before income taxes |  |                        | 25,874    |   |               |   | 8,569   |                               |  |   | 618             |   |  |       | (154    | ) |              |   | (3,890    | ) |  |   | 31,017    |  
|Income taxes (benefit)                                       |  |                        | 10,091    |   |               |   | 3,342   |                               |  |   | 272             |   |  |       | (60     | ) |              |   | (4,521    | ) |  |   | 9,124     |  
|                                                             |  |                        |           |   |               |   |         |                               |  |   |                 |   |  |       |         |   |              |   |           |   |  |   |           |  
|Income (loss) from continuing operations                     |  | $                      | 15,783    |   |               | $ | 5,227   |                               |  | $ | 346             |   |  | $     | (94     | ) |              | $ | 631       |   |  | $ | 21,893    |  
|                                                             |  |                        |           |   |               |   |         |                               |  |   |                 |   |  |       |         |   |              |   |           |   |  |   |           |  
|Discontinued operations:                                     |  |                        |           |   |               |   |         |                               |  |   |                 |   |  |       |         |   |              |   |           |   |  |   |           |  
|Loss from discontinued operations                            |  |                        |          |   |               |   |        |                               |  |   | (131            | ) |  |       |        |   |              |   |          |   |  |   | (131      | )
|Income tax benefit                                           |  |                        |          |   |               |   |        |                               |  |   | (51             | ) |  |       |        |   |              |   |          |   |  |   | (51       | )
|                                                             |  |                        |           |   |               |   |         |                               |  |   |                 |   |  |       |         |   |              |   |           |   |  |   |           |  
|Loss from discontinued operations                            |  | $                      |          |   |               | $ |        |                               |  | $ | (80             | ) |  | $     |        |   |              | $ |          |   |  | $ | (80       | )
|                                                             |  |                        |           |   |               |   |         |                               |  |   |                 |   |  |       |         |   |              |   |           |   |  |   |           |  
|Net Income (loss)                                            |  | $                      | 15,783    |   |               | $ | 5,227   |                               |  | $ | 266             |   |  | $     | (94     | ) |              | $ | 631       |   |  | $ | 21,813    |  
|                                                             |  |                        |           |   |               |   |         |                               |  |   |                 |   |  |       |         |   |              |   |           |   |  |   |           |  
|Segment profit percentage (continuing operations)            |  |                        | 74        | % |               |   | 24      | %                             |  |   | 2               | % |  |       | 0       | % |              |   | N/A       |   |  |   | 100       | %
|                                                             |  |                        |           |   |               |   |         |                               |  |   |                 |   |  |       |         |   |              |   |           |   |  |   |           |  
|Assets                                                       |  | $                      | 3,057,811 |   |               | $ | 649,253 |                               |  | $ | 13,566          |   |  | $     | 288,948 |   |              | $ | 1,414,971 |   |  | $ | 5,424,549 |  
|                                                             |  |                        |           |   |               |   |         |                               |  |   |                 |   |  |       |         |   |              |   |           |   |  |   |           |  
|For the six months ended June 30, 2005                       |  |                        |           |   |               |   |         |                               |  |   |                 |   |  |       |         |   |              |   |           |   |  |   |           |  
|Net interest income                                          |  | $                      | 48,546    |   |               | $ | 22,777  |                               |  | $ | 37              |   |  | $     | 2,366   |   |              | $ | 5,481     |   |  | $ | 79,207    |  
|Non-interest income                                          |  |                        | 4,071     |   |               |   | 8,945   |                               |  |   | 9,599           |   |  |       | 1,779   |   |              |   | 6,861     |   |  |   | 31,255    |  
|                                                             |  |                        |           |   |               |   |         |                               |  |   |                 |   |  |       |         |   |              |   |           |   |  |   |           |  
|Total revenue                                                |  |                        | 52,617    |   |               |   | 31,722  |                               |  |   | 9,636           |   |  |       | 4,145   |   |              |   | 12,342    |   |  |   | 110,462   |  
|Provision for loan losses                                    |  |                        | 4,629     |   |               |   | 883     |                               |  |   |                |   |  |       | 490     |   |              |   |          |   |  |   | 6,002     |  
|Depreciation and amortization                                |  |                        | 333       |   |               |   | 1,427   |                               |  |   | 94              |   |  |       | 134     |   |              |   | 2,087     |   |  |   | 4,075     |  
|Other non-interest expense                                   |  |                        | 22,887    |   |               |   | 22,190  |                               |  |   | 8,204           |   |  |       | 4,180   |   |              |   | 8,675     |   |  |   | 66,136    |  
|                                                             |  |                        |           |   |               |   |         |                               |  |   |                 |   |  |       |         |   |              |   |           |   |  |   |           |  
|Income (loss) from continuing operations before income taxes |  |                        | 24,768    |   |               |   | 7,222   |                               |  |   | 1,338           |   |  |       | (659    | ) |              |   | 1,580     |   |  |   | 34,249    |  
|Income taxes (benefit)                                       |  |                        | 9,660     |   |               |   | 2,816   |                               |  |   | 552             |   |  |       | (257    | ) |              |   | (2,813    | ) |  |   | 9,958     |  
|                                                             |  |                        |           |   |               |   |         |                               |  |   |                 |   |  |       |         |   |              |   |           |   |  |   |           |  
|Income (loss) from continuing operations                     |  | $                      | 15,108    |   |               | $ | 4,406   |                               |  | $ | 786             |   |  | $     | (402    | ) |              | $ | 4,393     |   |  | $ | 24,291    |  
|                                                             |  |                        |           |   |               |   |         |                               |  |   |                 |   |  |       |         |   |              |   |           |   |  |   |           |  
|Discontinued operations:                                     |  |                        |           |   |               |   |         |                               |  |   |                 |   |  |       |         |   |              |   |           |   |  |   |           |  
|Loss from discontinued operations                            |  |                        |          |   |               |   |        |                               |  |   | (92             | ) |  |       |        |   |              |   |          |   |  |   | (92       | )
|Income tax benefit                                           |  |                        |          |   |               |   |        |                               |  |   | (8              | ) |  |       |        |   |              |   |          |   |  |   | (8        | )
|                                                             |  |                        |           |   |               |   |         |                               |  |   |                 |   |  |       |         |   |              |   |           |   |  |   |           |  
|Loss from discontinued operations                            |  | $                      |          |   |               | $ |        |                               |  | $ | (84             | ) |  | $     |        |   |              | $ |          |   |  | $ | (84       | )
|                                                             |  |                        |           |   |               |   |         |                               |  |   |                 |   |  |       |         |   |              |   |           |   |  |   |           |  
|Net Income (loss)                                            |  | $                      | 15,108    |   |               | $ | 4,406   |                               |  | $ | 702             |   |  | $     | (402    | ) |              | $ | 4,393     |   |  | $ | 24,207    |  
|                                                             |  |                        |           |   |               |   |         |                               |  |   |                 |   |  |       |         |   |              |   |           |   |  |   |           |  
|Segment profit percentage (continuing operations)            |  |                        | 76        | % |               |   | 22      | %                             |  |   | 4               | % |  |       | -2      | % |              |   | N/A       |   |  |   | 100       | %
|                                                             |  |                        |           |   |               |   |         |                               |  |   |                 |   |  |       |         |   |              |   |           |   |  |   |           |  
|Assets                                                       |  | $                      | 2,679,771 |   |               | $ | 653,699 |                               |  | $ | 17,215          |   |  | $     | 252,056 |   |              | $ | 1,560,824 |   |  | $ | 5,163,565 |  
|                                                             |  |                        |           |   |               |   |         |                               |  |   |                 |   |  |       |         |   |              |   |           |   |  |   |           |  



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##### Table of Contents

NOTE 12 - EMPLOYEE BENEFIT PLANS

All eligible employees of the Company participate in the AMCORE Financial Security Plan (Security Plan), a qualified profit sharing plan under Section 401(a) of the Internal Revenue Code.
The Security Plan offers participants a personal retirement account funded by Company contributions and a personal savings account 401(k) funded by employee contributions and Company matching amounts. The expense related to the Security Plan was
$925,000 and $888,000 for the three-month periods ended June 30, 2006 and 2005, respectively, and was $2.1 million for each of the six-month periods ended June 30, 2006 and 2005. The Company also has a non-qualified profit sharing plan
that provides a cash profit sharing payment based upon achievement of corporate performance goals, to all employees who have met service requirements. The expense related to the profit sharing plan was $174,000 and $296,000 for the three-month
periods ended June 30, 2006 and 2005, respectively, and was $360,000 and $589,000 for the six-month periods ended June 30, 2006 and 2005, respectively.

The AMCORE Financial, Inc. Employee Health Benefit Plan (Health Plan) provides group medical, pharmacy, dental and vision benefits to eligible participating employees of the Company and their dependents. Employees,
retirees, and COBRA beneficiaries contribute specific amounts determined annually by the Health Plans administrator. The Companys share of the cost of these benefits is expensed as incurred. Expense related to the Health Plan was $1.3
million and $1.2 million for the three-month periods ended June 30, 2006 and 2005, respectively, and was $2.5 million for each of the six-month periods ended June 30, 2006 and 2005. Life insurance benefits are provided to eligible active
employees.

The Company provides a deferred compensation plan (entitled AMCORE Financial, Inc. Deferred Compensation Plan) for
certain key employees and directors. This plan provides the opportunity to defer salary, bonuses and non-employee director fees. Participants may defer up to 90% of base compensation and up to 100% of bonus. The deferred compensation liability to
participants is recorded in other liabilities in the Consolidated Balance Sheets. The deferrals and earnings grow tax deferred until withdrawn from the plan. The amount and method of payment are pre-defined by participants each year of deferral.
Earnings to individual accounts are recorded as compensation expense when earned. The total non-qualified deferred compensation plan liability totaled $13.9 million and $14.1 million at June 30, 2006 and 2005, respectively. Expense related to
the deferred compensation plan was $208,000 and $109,000 for the three-month periods ended June 30, 2006 and 2005, respectively, and was $441,000 and $233,000 for the six-month periods ended June 30, 2006 and 2005, respectively.

The Company provides additional retirement benefits to certain senior officers through plans that are non-qualified, non-contributory and
unfunded. Under one such arrangement, the additional retirement benefits replace what would have been provided under the Companys defined contribution qualified plan in the absence of limits placed on qualified plan benefits by the Internal
Revenue Code of 1986. The expense related to this arrangement was $57,000 and $76,000 for the three-month periods ended June 30, 2006 and 2005, respectively, and was $114,000 and $153,000 for the six-month periods ended June 30, 2006 and
2005, respectively.

Another arrangement, which is a defined benefit plan, provides supplemental retirement benefits that are based upon
three percent of final base salary, times the number of years of service. Benefits under this plan may not exceed 70% or be less than 45% of a participants final base salary less offsets for employer retirement plan benefits attributable to
employer contributions and 50% of a participants Social Security benefit. The measurement date for obligations for this plan is as of December 31. The following table summarizes the costs and obligations to participants for the
three-month periods ended June 30, 2006 and 2005:



|                                         |  |                                     |    |                                   |   |      |  |   |      |   |  |   |      |  
|---------------------------------------- |  | ----------------------------------- | -- | --------------------------------- | - | ---- |  | - | ---- | - |  | - | ---- | -
|                                         |  | For the Three Months Ended June 30, |    | For the Six Months Ended June 30, |  
|                                         |  | 2006                                |    | 2005                              |   | 2006 |  |   | 2005 |  
|                                         |  | (in thousands)                      |   
|Components of net periodic benefit cost: |  |                                     |    |                                  
|Service cost                             |  | $                                   | 7  |                                   | $ | 2    |  | $ | 14   |   |  | $ | 5    |  
|Interest cost                            |  |                                     | 29 |                                   |   | 22   |  |   | 58   |   |  |   | 45   |  
|Actuarial losses and changes in offsets  |  |                                     |   |                                   |   |     |  |   | 189  |   |  |   |     |  
|                                         |  |                                     |    |                                   |   |      |  |   |      |   |  |   |      |  
|Net periodic cost                        |  | $                                   | 36 |                                   | $ | 24   |  | $ | 261  |   |  | $ | 50   |  
|                                         |  |                                     |    |                                   |   |      |  |   |      |   |  |   |      |  
|                                         |  |                                     |    |                                  
|                                         |  |                                     |    |                                   |   | 2006 |  |   | 2005 |  
|Weighted-average assumptions:            |  |                                     |    |                                   |   |      |  |   |      |   |  |   |      |  
|Discount rate                            |  |                                     |    |                                   |   |      |  |   | 5.75 | % |  |   | 5.75 | %
|Rate of compensation increase            |  |                                     |    |                                   |   |      |  |   | 3.00 | % |  |   | 3.00 | %

During the first quarter of 2006, $134,000 was contributed to the plan to fund distributions to
plan participants. No contributions or distributions were made during the second quarter and none are expected to be made during the remainder of the year. The plan has no assets at June 30, 2006.



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NOTE 13 - STOCK-BASED COMPENSATION

The Company has several stock-based compensation plans. The Company provides an employee stock purchase plan and makes awards of stock options, restricted stock and performance share units
(PSUs). Effective January 1, 2006, the Company adopted the fair value recognition provisions of SFAS 123R, Share-Based Payment, using the modified prospective transition method as permitted by SFAS 123R. Accordingly,
the Company has not restated prior period results to reflect the impact of SFAS 123R. Under this transition method, compensation cost is recognized for all share-based payments granted subsequent to the effective date and for all awards granted, but
not yet vested, prior to the effective date.

Prior to January 1, 2006, the Company accounted for awards granted under those plans using
the recognition and measurement principles of Accounting Principles Board Opinion (APB) No. 25, Accounting for Stock Issued to Employees, and related interpretations. Stock options were granted at an exercise price equal to the market
value on the date of grant and as a result no expense was recorded. Proforma expense was estimated using a Black-Scholes valuation model. Restricted stock was recorded at the market value on the date of issuance and performance share units were
revalued each period based upon actual performance and current market value and recognized over the period during which they were earned.

The Companys actual expense related to stock-based compensation for the quarters and year-to-date periods ended June 30, 2006 and 2005 were as follows:



|                                                              |  |                            |     |                          |   |      |  |      |       |  |   |    
|------------------------------------------------------------- |  | -------------------------- | --- | ------------------------ | - | ---- |  | ---- | ----- |  | - | ---
|                                                              |  | Three MonthsEnded June 30, |     | Six MonthsEnded June 30,
|                                                              |  | 2006                       |     | 2005                     |   | 2006 |  | 2005
|                                                              |  | (in thousands)            
|Compensation expense included in reported operating expenses: |  |                            |     |                          |   |      |  |      |       |  |   |    
|Stock options                                                 |  | $                          | 605 |                          |   | N/A  |  | $    | 1,541 |  |   | N/A
|Employee stock purchase plan                                  |  |                            | 10  |                          |   | N/A  |  |      | 17    |  |   | N/A
|Performance share units                                       |  |                            | 210 |                          | $ | 126  |  |      | 260   |  | $ | 373
|Restricted stock                                              |  |                            | 42  |                          |   | 40   |  |      | 84    |  |   | 75 
|                                                              |  |                            |     |                          |   |      |  |      |       |  |   |    
|Total stock-based compensation expense                        |  | $                          | 867 |                          | $ | 166  |  | $    | 1,902 |  | $ | 448
|                                                              |  |                            |     |                          |   |      |  |      |       |  |   |    
|Income tax benefits                                           |  | $                          | 327 |                          | $ | 61   |  | $    | 716   |  | $ | 169

At June 30, 2006, total unrecognized stock-based compensation expense was $6.1 million, net of
estimated forfeitures, which will be recognized over a weighted average amortization period of 2.8 years. Prior to adopting SFAS 123R, the Company presented tax benefits resulting from the exercise of stock options as operating cash flows in the
Statement of Cash Flows. SFAS 123R requires cash flows resulting from the tax benefits from tax deductions in excess of the compensation cost recognized (excess tax benefits) to be classified as financing cash flows. For the three and six months
ended June 30, 2006, $62,000 and $121,000, respectively, of excess tax benefits have been classified as an operating cash outflow and financing cash inflow.

The Company estimates the fair value of stock options using a Black-Scholes valuation model. The fair value of restricted stock, PSUs and employee stock purchase plan grants generally equals their intrinsic value on
the date of grant. The fair value of stock-based grants is amortized to operating expense on a straight-line basis over the required vesting period of the grant. Stock option grants made to retirement eligible employees are fully expensed during the
period in which the options are granted.

In anticipation of adoption of SFAS 123R, the Company evaluated the assumptions used in the
Black-Scholes model. As a result, the Company changed its methodology for computing expected volatility and expected term. Calculation of expected volatility was changed from being based solely on historical volatility to a combination of both
historical volatility and implied volatility derived from an analysis of relevant indices volatility trends. The Company believes that the combination of historical and implied volatility provides a better estimate of expected stock price
volatility and will continue to monitor these and other relevant factors to estimate expected volatility for future option grants. The Company utilized the simplified method for estimating the expected term of options granted during the
period as provided for in Staff Accounting Bulletin 107.

The Company continues to base the estimate of risk-free rate on the U.S. Treasury
yield curve in effect at the time of grant. Dividend yield is the Companys annual dividend rate expressed as a percentage of the closing stock price on grant date. Estimated forfeitures are based on historical employee termination experience.
The estimate of forfeitures is adjusted to the extent that actual forfeitures differ from such estimates. Changes in estimated forfeitures are recognized in subsequent periods as they occur.



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The fair value of the Companys employee and director stock options granted during the second
quarters of 2006 and 2005 was estimated using the Black-Scholes option-pricing model with the following weighted average assumptions.



|                                                |  |                |       |   |      |   |       |  
|----------------------------------------------- |  | -------------- | ----- | - | ---- | - | ----- | -
|                                                |  | Second Quarter |      
|                                                |  | 2006           |       |   | 2005 |  
|Expected dividend yield                         |  |                | 2.48  | % |      |   | 2.28  | %
|Expected price volatility                       |  |                | 19.08 | % |      |   | 27.95 | %
|Expected term in years                          |  |                | 6.09  |   |      |   | 6.10  |  
|Expected risk-free interest rate                |  |                | 5.06  | % |      |   | 3.93  | %
|Estimated forfeiture rate                       |  |                | 1.53  | % |      |   | 1.79  | %
|Estimated average fair value of options granted |  | $              | 6.32  |   |      | $ | 7.07  |  

Employee Stock Award and Incentive Plans. The 2005 Stock Award and Incentive Plan (SAIP)
allows for awards to key employees of stock options, restricted shares, PSUs and other forms of stock-based awards. The maximum number of shares to be granted under the plan is 2,125,000. The Company will not reprice any awards under the SAIP unless
such repricing is approved by a majority vote of the Companys stockholders. Awards issued pursuant to the SAIP that expire, are forfeited or terminated for any reason shall again be available to grant.

Stock Options.Non-qualified stock options are issued at an exercise price equal to the fair market value of the shares on the grant date
and generally vest within three to five years and expire from seven to ten years from the date of grant. Options issued are valued using the Black-Scholes model with assumptions as previously described. The activity during the first six months of
2006 and the total options outstanding and exercisable as of June 30, 2006 pursuant to the SAIP and previous incentive plans are as follows:



|                                         |  |           |   |  |                                 |       |                                            |           |                                   |   |      
|---------------------------------------- |  | --------- | - |  | ------------------------------- | ----- | ------------------------------------------ | --------- | --------------------------------- | - | -----
|                                         |  | Shares    |   |  | Weighted Average Exercise Price |       | Weighted AverageRemaining Contractual Life |           | Aggregate Intrinsic Value (000s)
|Options outstanding at beginning of year |  | 1,815,566 |   |  | $                               | 24.43 |                                            |           |                                   |   |      
|Options granted                          |  | 474,283   |   |  |                                 | 30.07 |                                            |           |                                   |   |      
|Option reloads                           |  | 8,054     |   |  |                                 | 30.31 |                                            |           |                                   |   |      
|Options exercised                        |  | (95,540   | ) |  |                                 | 22.02 |                                            |           |                                   |   |      
|Options forfeited                        |  | (31,559   | ) |  |                                 | 29.15 |                                            |           |                                   |   |      
|                                         |  |           |   |  |                                 |       |                                            |           |                                   |   |      
|Options outstanding at June 30, 2006     |  | 2,170,804 |   |  | $                               | 25.72 |                                            | 5.5 years |                                   | $ | 8,559
|                                         |  |           |   |  |                                 |       |                                            |           |                                   |   |      
|Options exercisable at June 30, 2006     |  | 1,288,919 |   |  | $                               | 23.76 |                                            | 3.5 years |                                   | $ | 7,474

Performance Share Units (PSUs). The Company grants PSUs pursuant to the terms and
conditions of the SAIP under various sub-plans as provided for in Section 8(e) of the SAIP. The sub-plans establish performance periods that are generally one to three-year periods during which PSUs may be earned. Specific performance goals and
target PSUs granted are approved by the Compensation Committee of the AMCORE Financial, Inc. Board of Directors. The number of PSUs earned can range from 0% to 200% of the target PSUs granted. Each PSU represents the right to receive a share of the
Companys common stock at the end of the performance period, some of which may be issued as restricted shares. One plan allows for PSUs to be converted to common shares and issued at the end of the three-year performance. Two additional plans
allow for PSUs to be converted to restricted common shares after the performance period and vest over five years.

Compensation expense is
calculated based upon the expected number of PSUs earned during the performance period and is recorded over the service period. The fair value is calculated equal to market value on the date of grant less the present value of dividends that are not
earned during the performance period. As of June 30, 2006, 123,331 PSUs were expected to be earned and the weighted average grant date fair value per PSU was $28.44. Expense is adjusted for forfeitures as they occur



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|                                         |  |         |   |  |                                      |       |                                        |          
|---------------------------------------- |  | ------- | - |  | ------------------------------------ | ----- | -------------------------------------- | ---------
|                                         |  | Units   |   |  | Weighted Average Fair Value Per
Unit |       | Weighted AverageRemaining Vesting Term
|Options outstanding at beginning of year |  | 63,146  |   |  | $                                    | 30.72 |                                        |          
|Units granted                            |  | 74,030  |   |  |                                      | 27.60 |                                        |          
|Units forfeited                          |  | (3,300  | ) |  |                                      | 28.89 |                                        |          
|Adjustment to estimated grants           |  | (10,545 | ) |  |                                      | 30.72 |                                        |          
|                                         |  |         |   |  |                                      |       |                                        |          
|Units outstanding at June 30, 2006       |  | 123,331 |   |  | $                                    | 28.44 |                                        | 4.0 years
|                                         |  |         |   |  |                                      |       |                                        |          

Restricted Stock Awards.The Company granted restricted stock awards to certain key
employees. The shares are restricted as to transfer, but are not restricted as to dividend payment and voting rights. Transfer restrictions lapse at the end of three or nine years contingent upon performance goals being met and continued employment.
Restricted stock grants are valued at market value on the date of grant and are expensed over the service period. As of June 30, 2006, non-vested shares totaled 10,071 with a weighted average fair value of $22.84 per share. No awards were granted or
forfeited and no restrictions were released during the first six months of 2006.

Directors Stock Plans. The Restricted Stock
Plan for Non-Employee Directors provides that each current eligible non-employee director and each subsequently elected non-employee director receive, in lieu of a cash retainer, shares of common stock of the Company, the value of which is equal to
three times the annual retainer. Restricted stock grants are valued at market value on the date of grant and are expensed over the required service period. The shares vest annually over a three-year period based upon the anniversary date of the
election and continued service as a director. As of June 30, 2006, restricted shares totaled 16,026 with a weighted average fair value of $27.18 per share. Restrictions were released on 4,564 shares during the second quarter of 2006.

The 2001 Stock Option Plan for Non-Employee Directors provides that each current eligible non-employee director and each subsequently elected
non-employee director receive options to purchase common stock of the Company. Options granted have an exercise price equal to the market value on the date of grant and generally vest within one to three years and expire in seven to 10 years from
the date of grant. Stock options granted pursuant to this plan are valued using a Black-Scholes model with assumptions as previously described. The activity during the first six months of 2006 and the total options outstanding and exercisable as of
June 30, 2006 pursuant to the director option plan and previous director option plans are as follows:



|                                         |  |         |   |  |                                 |       |                                            |           |                                   |   |    
|---------------------------------------- |  | ------- | - |  | ------------------------------- | ----- | ------------------------------------------ | --------- | --------------------------------- | - | ---
|                                         |  | Shares  |   |  | Weighted Average Exercise Price |       | Weighted AverageRemaining Contractual Life |           | Aggregate Intrinsic Value (000s)
|Options outstanding at beginning of year |  | 101,000 |   |  | $                               | 22.90 |                                            |           |                                   |   |    
|Options granted                          |  | 20,000  |   |  |                                 | 29.45 |                                            |           |                                   |   |    
|Options exercised                        |  | (3,750  | ) |  |                                 | 13.33 |                                            |           |                                   |   |    
|                                         |  |         |   |  |                                 |       |                                            |           |                                   |   |    
|Options outstanding at June 30, 2006     |  | 117,250 |   |  | $                               | 24.33 |                                            | 5.1 years |                                   | $ | 609
|                                         |  |         |   |  |                                 |       |                                            |           |                                   |   |    
|Options exercisable at June 30, 2006     |  | 97,250  |   |  | $                               | 23.27 |                                            | 4.2 years |                                   | $ | 607

Non-vested options and exercise proceeds. A summary of the Companys non-vested stock
options for the six months ended June 30, 2006 is presented below.



|                                         |  |                  |   |                  |               |       |        |         |   |               |   |      
|---------------------------------------- |  | ---------------- | - | ---------------- | ------------- | ----- | ------ | ------- | - | ------------- | - | -----
|                                         |  | Employee options |   | Director options
|                                         |  | Shares           |   |                  | Average Price |       | Shares |         |   | Average Price
|Options outstanding at beginning of year |  | 686,458          |   |                  | $             | 26.84 |        | 20,000  |   |               | $ | 25.88
|Options granted                          |  | 482,337          |   |                  |               | 30.07 |        | 20,000  |   |               |   | 29.45
|Options forfeited                        |  | (31,559          | ) |                  |               | 29.15 |        |        |   |               |   |     
|Options vested                           |  | (255,351         | ) |                  |               | 26.56 |        | (20,000 | ) |               |   | 25.88
|                                         |  |                  |   |                  |               |       |        |         |   |               |   |      
|Non-vested options at June 30, 2006      |  | 881,885          |   |                  | $             | 28.60 |        | 20,000  |   |               | $ | 29.45
|                                         |  |                  |   |                  |               |       |        |         |   |               |   |      

The total fair value of stock options that vested during the first six months of 2006 was $1.9
million, or $6.96 per option. Stock options exercised by employees and directors in the first six months of 2006 totaled 99,290 shares with an intrinsic value of $871,000. The Company received cash or stock equivalent to the exercise price of $2.2
million and a tax benefit of $328,000 was recognized. The total fair value of stock options that vested during the first six months of 2005 was $2.3 million, or $7.16 per option. Stock options exercised by employees and directors in the first six
months of 2005 totaled 64,320 shares with an intrinsic value of $530,000. Shares are issued from treasury stock to fulfill exercises. The Company repurchases shares in open market and



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private transactions in accordance with Exchange Act Rule 10b-18 to replenish treasury stock for issuances related to stock option exercises and other
employee benefit plans.

Employee Stock Purchase Plan. The AMCORE Stock Option Advantage Plan permits eligible employees to purchase
from the Company shares of its common stock. The Company intends that the plan be an employee stock purchase plan (ESPP) within the meaning of Section 423 of the Internal Revenue Code of 1986. Reserved for issuance under the ESPP is a
total of 600,000 shares of unissued common stock. The exercise or purchase price is 85% of the lower of the closing price of the Companys common stock on the Nasdaq National Market on the first or last day of each offering period.

Shares issued pursuant to the ESPP are prohibited from sale by a participant for two years after the date of purchase. Dividends earned are credited
to a participants account and used to purchase shares from the Companys treasury stock at the same discounted price on the next purchase date. The Company has the option to purchase all, or any portion of, the shares owned by such
participant that, at the time of termination of employment, are subject to the restriction on transfer. The 15% discount is recorded as compensation expense and is amortized on a straight-line basis over the two-year service period. As of June 30,
2006, $64,000 remains unrecognized related to shares issued during 2006.

Prior Period Proforma Presentation. Prior to January 1,
2006 the Company accounted for stock-based compensation plans pursuant to APB 25. The following table sets forth proforma information as if compensation expense had been determined consistent with the requirements of SFAS 123.



|                                                      |  |                                                                                                                                    |        |                                         |      |   |                                        |  |      |  
|----------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------- | ------ | --------------------------------------- | ---- | - | -------------------------------------- |  | ---- | -
|                                                      |  |                                                                                                                                    |        | For the ThreeMonths ended
June 30, 2005 |      |   | For the Six Months ended June 30,
2005 | 
|                                                      |  |                                                                                                                                    |        | (000s, except per share data)          |     
|Net Income:                                           |  |                                                                                                                                    |        |                                         |      |   |                                        | 
|Income from continuing operations                     |  | $                                                                                                                                  | 12,157 |                                         |      | $ | 24,207                                 | 
|Deduct:                                               |  | Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effect |        |                                         | (441 | ) |                                        |  | (898 | )
|                                                      |  |                                                                                                                                    |        |                                         |      |   |                                        |  |      |  
|Pro forma                                             |  | $                                                                                                                                  | 11,716 |                                         |      | $ | 23,309                                 | 
|                                                      |  |                                                                                                                                    |        |                                         |      |   |                                        |  |      |  
|Diluted Shares:                                       |  |                                                                                                                                    |        |                                         |      |   |                                        | 
|As reported                                           |  |                                                                                                                                    | 25,020 |                                         |      |   | 25,044                                 | 
|Deduct:                                               |  | Shares due to average unrecognized compensation cost related to future services                                                    |        |                                         | (113 | ) |                                        |  | (102 | )
|                                                      |  |                                                                                                                                    |        |                                         |      |   |                                        |  |      |  
|Pro forma                                             |  |                                                                                                                                    | 24,907 |                                         |      |   | 24,942                                 | 
|                                                      |  |                                                                                                                                    |        |                                         |      |   |                                        |  |      |  
|Basic Earnings per share from continuing operations   |  |                                                                                                                                    |        |                                         |      |   |                                        | 
|As reported                                           |  | $                                                                                                                                  | 0.49   |                                         |      | $ | 0.98                                   | 
|Pro forma                                             |  |                                                                                                                                    | 0.47   |                                         |      |   | 0.94                                   | 
|Diluted Earnings per share from continuing operations |  |                                                                                                                                    |        |                                         |      |   |                                        | 
|As reported                                           |  | $                                                                                                                                  | 0.49   |                                         |      | $ | 0.97                                   | 
|Pro forma                                             |  |                                                                                                                                    | 0.47   |                                         |      |   | 0.93                                   | 



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|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

The following discussion highlights the significant factors affecting AMCORE Financial, Inc. and Subsidiaries (AMCORE or the
Company) consolidated financial condition as of June 30, 2006 compared to December 31, 2005, and the consolidated results of operations for the three and six month periods ended June 30, 2006 compared to the same periods
in 2005. The discussion should be read in conjunction with the Consolidated Financial Statements, accompanying Notes to the Consolidated Financial Statements, and selected financial data appearing elsewhere within this report.

FACTORS INFLUENCING FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q contains, and periodic filings with the Securities and Exchange Commission and written or oral statements made by the Companys officers and directors to the press, potential
investors, securities analysts and others will contain, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934, and the Company intends that such
forward-looking statements be subject to the safe harbors created thereby with respect to, among other things, 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, should, may, will or similar expressions identify forward-looking statements.
Forward-looking statements speak only as of the date they are made, and AMCORE undertakes no obligation to update publicly any forward-looking statements 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 or existing competitors; (II) adverse state, local and federal
legislation and regulation or adverse findings or rulings made by local, state or federal regulators or agencies regarding AMCORE and its operations; (III) failure to obtain new customers and retain existing customers; (IV) inability to carry out
marketing and/or expansion plans; (V) ability to attract and retain key executives or personnel; (VI) changes in interest rates including the effect of prepayments; (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) unexpected outcomes on existing or new litigation in which AMCORE, its subsidiaries, officers, directors or employees are named defendants; (XIV) technological changes; (XV) changes in U.S.
generally accepted accounting principles; (XVI) changes in assumptions or conditions affecting the application of critical accounting estimates; (XVII) inability of third-party vendors to perform critical services for the Company or its
customers; (XVIII) disruption of operations caused by the conversion and installation of data processing systems; and (XIX) zoning restrictions or other limitations at the local level, which could prevent limited branches from transitioning to
full-service facilities.

OVERVIEW OF OPERATIONS

Quarter Only Results

AMCORE reported net income from continuing operations of $11.4 million or $0.46
per diluted share for the three months ended June 30, 2006. This compares to $12.2 million or $0.49 per diluted share for the same period in 2005 and represents a $729,000 or 6% decrease in the second quarter of 2006 over the same period a year
ago. Diluted earnings per share from continuing operations decreased 6% or $0.03. AMCOREs annualized return on average equity and on average assets from continuing operations for the second quarter of 2006 was 11.52% and 0.86%, respectively,
compared to 12.52% and 0.96% for the comparable period in 2005.



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The most significant factors affecting the second quarter of 2006 net income from continuing operations,
compared to the same period in 2005, were:

Net interest income - Increased $1.4 million primarily due to increased loan
yields and volumes, which were reduced by increased funding costs. Net interest margin was 3.40% in the second quarter of 2006 compared to 3.52% in the second quarter 2005. The reduction in net interest margin was primarily due to increased funding
costs associated with a rising interest rate environment.

Provision for loan losses - Declined $1.3 million reflecting lower
net charge-offs.

Non-interest income - Increased $1.5 million. The most significant increases were $734,000 in service
charges on deposits and $648,000 in mortgage banking income.

Operating expenses - Increased $4.9 million, due to higher
personnel costs and professional fees.

Income taxes - Increased $96,000, due to a decrease in tax-advantaged income, partly
offset by lower pre-tax income. The effective tax rate was 29.8% in the second quarter of 2006 compared to 28.1% in the same period of 2005.

Year-to-Date Results

AMCORE reported net income of $21.9 million, or $0.88 per diluted share from continuing operations,
for the six months ended June 30, 2006 compared to $24.3 million or $0.97 per diluted share for the same period in 2005. This represents a $2.4 million or 10% decline year-over-year.

Diluted earnings per share from continuing operations decreased 9% or $0.09. AMCOREs annualized return on average equity and on average assets from continuing operations for the
year-to-date period of 2006 was 11.06% and 0.83%, respectively, compared to 12.60% and 0.98% for the comparable period in 2005.

The most
significant factors affecting 2006 year-to-date net income, compared to the same period in 2005, were:

Net interest income -
Increased $3.5 million primarily due to increased loan yields and volumes, which were reduced by increased funding costs. Net interest margin was 3.42% in 2006 compared to 3.54% in 2005. The reduction in net interest margin was primarily due to
increased funding costs associated with a rising interest rate environment and deposit attraction strategies.

Provision for loan
losses - Declined $1.8 million as a result of lower net charge offs.

Non-interest income - Increased $1.9 million.
The most significant increases were attributable to a $1.1 million increase in service charges on deposits, $565,000 increase in mortgage banking income and $536,000 in bankcard fee income.

Operating expenses - Increased $10.4 million, primarily due to higher personnel costs and professional fees.

Income taxes - Decreased $834,000, due to lower earnings before income taxes. The effective tax rate was 29.4% in 2006 compared to 29.1% in 2005.

KEY INITIATIVES AND OTHER SIGNIFICANT EVENTS

Key Initiatives

Branch Expansion - The Companys banking operations (Bank) launched a branch
expansion initiative during 2001 targeting the area generally bounded by Interstates 94 in the north, 294 and 94 in the east, 80 in the south and 90 and 39 in the west (the Branch Expansion). The Branch Expansion strategy initially
targets markets where there are high concentrations of mid-size businesses, with a seasoned commercial lending and treasury management sales staff in a leased facility (limited branch office or LBO). Once a book of business is developed
and the LBO becomes profitable, plans to develop a permanent site for a full service facility in a nearby area that is surrounded by a high concentration of homeowners with strong population and household income growth are initiated. Increased
capabilities



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in the markets served by these facilities, in addition to better brand recognition, are expected to accelerate the Companys ability to generate
bank-issued deposits, which will better support loan growth and decrease the use of wholesale funding.

Since the inception of the Branch
Expansion strategy in April 2001, 27 new branches, net of closed offices, have opened. The new locations have contributed $1.63 billion in loans and $701 million in deposits outstanding as of June 30, 2006. Same store contributions, which
include new branches that have been open at least one year, were $1.61 billion in loans and $692 million in deposits outstanding at June 30, 2006. During the first six months of 2006, the Company opened three LBOs in the Chicago suburbs of
Joliet, Wheaton and Northbrook and one full-service branch in Belvidere, Illinois.

The Company has regulatory approval to open 13
additional branches, five of which are expected to open during the remainder of 2006. By the end of 2009 the Company expects to have two-thirds of its branches located in markets that the Company believes exhibit strong growth characteristics.

To date, the Companys Board of Directors has authorized $120 million of capital expenditures for new facilities in connection with
the Companys Branch Expansion. As of June 30, 2006, $59 million of the $120 million capital authorization remained to be spent.

As a complement to its Branch Expansion, the Bank has also expanded its automated teller machine system (ATMs), which includes both owned and third party operated machines, to 140 in Illinois and 145 in Wisconsin, or 285 overall, at
June 30, 2006 from 131 in Illinois and 36 in Wisconsin, or 167 overall, at June 30, 2005. These amounts include ATMs located in Walgreens drug stores throughout Wisconsin as part of a co-branding relationship which began in the third
quarter of 2005. The placement of additional ATMs is an important part of AMCOREs commitment to provide quality customer service as additional ATMs provide AMCORE customers with greater ease and convenience in completing banking transactions.

Quality Loan Growth - Improving credit quality is part of AMCOREs Quality Loan Growth initiative. For the second
quarter of 2006, average loans rose $403 million to $3.8 billion, a 12% increase over the same period in 2005. Over the same period of time, total non-performing loans increased 9% or $2.4 million to $29.0 million. The increase was comprised of one
commercial real-estate credit with a specific loss allocation. As pricing spreads continue to narrow, maintaining credit and pricing discipline is likely to exert downward pressure on future loan growth.

Deposit Growth - Average bank-issued deposits grew to $3.5 billion in the second quarter of 2006, an increase of 6%, or $183 million,
compared to $3.3 billion in the second quarter of 2005. AMCORE continues to focus on transactional deposit growth, such as checking accounts, which helps lower funding costs, as well as increasing the number of households served by the Company.
Handling a customers checking account enables the Bank to cross-sell other products and increases the likelihood of retaining their business over time. The Companys goal is to become the customers primary bank, meeting all of their
banking, mortgage and investment needs. On the commercial side, the Companys main emphasis is on cash management products, including remote deposit capture, as it focuses on its core niche of mid-size commercial customers.

AMCORE continues to focus on bank-issued deposit growth because it provides a source of funding for the Branch Expansion and the Quality Loan Growth
initiatives, and is also a means of reducing reliance on wholesale funding sources. Customer attraction strategies during 2005, especially in the newer markets, included a market segment of high initial rates for transaction and savings account
balances. While this strategy did initially bring in balances, as rates rose these customers migrated either to CDs or to other high rate products within the bank once the high initial rates expired. This strategy is being phased out in 2006, and a
more market-oriented, spread-based deposit sales strategy that focuses on pricing at competitive but profitable levels is being emphasized.

Increasing Fee Income - Increasing fee income, specifically from the Investment Management and Trust segment (IMT) and Mortgage Banking segment, is an area of increased management attention. As of the end of 2005, IMT
completed its migration to an open architecture sales platform, which allows greater customer access to non-proprietary products. This included the transition of $142 million in assets of three Company-managed Vintage equity funds into two mutual
funds managed by Federated Investors, Inc. (Federated) in September 2005 and the sale of the asset management subsidiary, Investors Management Group, Ltd. (IMG), to West Bancorporation, Inc. (West Banc) on



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December 30, 2005. With these transactions, AMCORE has transitioned from being a developer of proprietary investment products to being a provider that
can offer its customers a wider array of investment product choices. The results of IMG for prior periods and the related sale are reported as discontinued operations.

The changes in the business due to the combined impact of the Federated and West Banc transactions have resulted in slower income growth in the short run.

Capital Efficiency and Deployment - The Companys priorities with respect to effectively deploying capital include a more structured pricing discipline that targets profitable
growth on both sides of the balance sheet, matching of repricing characteristics of assets and liabilities, migration of the balance sheet away from lower spread investments to higher spread loans and buying back its common shares.

During the first half of 2006, the Company liquidated $25 million of callable Agency debentures, and used the proceeds to pay down short-term debt. In
addition, it resold $15 million of the Companys issuance of a trust preferred security that it had repurchased a few years ago. At June 30, 2006, securities available for sale were $1.1 billion or 20% of total assets compared to $1.2
billion or 22% at December 31, 2005. Also during the first quarter of 2006, the Company increased its dividend from $0.17 to $0.185 per share, an increase of $0.015 per share, or 9%.

Other Significant Events

Stock Repurchase Authorization - On
May 4, 2006, the Company announced that its Board of Directors authorized a stock repurchase program (Repurchase Program) of up to 3 million common shares, or approximately 12% of diluted shares outstanding. The repurchase authorization is
for a twelve-month period. The repurchased shares will become treasury shares. During the second quarter of 2006, 200,000 shares were repurchased pursuant to the program at an average price of $31.25 per share.

Accounting Changes - Statement of Financial Accounting Standards (SFAS) No. 123 (Revised 2005) (123R), Share-Based Payment
requiring compensation cost relating to share-based payment transactions was effective for periods beginning after December 15, 2005. The Companys implementation of SFAS No. 123R resulted in an increase in stock-based compensation
expense of $701,000 in the second quarter of 2006 and a year-to-date increase of $1.5 million. Total stock-based compensation expense in the second quarter of 2006 was $867,000 and was $1.9 million for the first six months of 2006.

Key Personnel Changes - In July 2006, the Company announced the resignation of Joseph B. McGougan, President of AMCORE Mortgage, a division
of the Bank. In connection with the resignation, the Company entered into a severance agreement with Mr. McGougan providing for payment of one years base salary and certain other benefits. The AMCORE Mortgage President position will not
be replaced.

Regulatory Developments - On May 31, 2005, AMCORE Bank, N.A. entered into a written agreement with the
Office of the Comptroller of the Currency (OCC). The agreement describes commitments made by the Bank and outlines a series of steps to address and strengthen the Banks regulatory consumer compliance program. The Bank has continued to
implement enhancements to its consumer compliance program to address the matters identified by the OCC. These enhancements are subject to review by the OCC to determine if they comply with the commitment made in the agreement or whether additional
steps are necessary.

During the third quarter 2006, AMCORE Bank, N.A. expects to enter into a Consent Order with the OCC. This order will
primarily impose requirements on the Bank to take certain actions to strengthen its compliance monitoring policies, procedures, training and overall program relating to the Bank Secrecy Act/Anti-Money Laundering (BSA/AML) regulations. The Consent
Order is not expected to impose any fine or civil money penalty on the Bank, but is expected to result in the ineligibility for certain expedited approvals. AMCORE has been working diligently to strengthen and enhance its compliance programs,
including its consumer compliance and BSA/AML program by hiring a General Counsel and Chief Compliance Officer, upgrading staff and technology, and making use of outside consulting resources.



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EARNINGS REVIEW OF CONSOLIDATED STATEMENTS OF INCOME

The following highlights a comparative discussion of the major components of net income and their impact for the three and six months ended June 30,
2006 and 2005.

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 investment 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, or FTE basis. The FTE adjustment was calculated using AMCOREs
statutory federal income tax rate of 35%.

Overview - FTE adjusted interest income is as follows
(in thousands):



|                              |  |                                    |        |                                  |   |        |  |      |         |  |   |        
|----------------------------- |  | ---------------------------------- | ------ | -------------------------------- | - | ------ |  | ---- | ------- |  | - | -------
|                              |  | For the Three Months EndedJune 30, |        | For the Six months EndedJune 30,
|                              |  | 2006                               |        | 2005                             |   | 2006   |  | 2005
|Interest Income Book Basis    |  | $                                  | 83,567 |                                  | $ | 67,776 |  | $    | 163,561 |  | $ | 131,010
|FTE Adjustment                |  |                                    | 1,070  |                                  |   | 1,232  |  |      | 2,163   |  |   | 2,428  
|                              |  |                                    |        |                                  |   |        |  |      |         |  |   |        
|Interest Income FTE Basis     |  | $                                  | 84,637 |                                  | $ | 69,008 |  | $    | 165,724 |  | $ | 133,438
|Interest Expense              |  |                                    | 42,247 |                                  |   | 27,881 |  |      | 80,811  |  |   | 51,803 
|                              |  |                                    |        |                                  |   |        |  |      |         |  |   |        
|Net Interest Income FTE Basis |  | $                                  | 42,390 |                                  | $ | 41,127 |  | $    | 84,913  |  | $ | 81,635 
|                              |  |                                    |        |                                  |   |        |  |      |         |  |   |        

Net interest income on an FTE basis increased $1.3 million or 3% in the second quarter of 2006
compared to the same period in 2005. On a year-to-date basis, net interest income on an FTE basis was also up 4% or $3.3 million. The increases for the three and six month periods were driven by increases in average loan volumes of 12% and 13%,
respectively, and were partially offset by increases in interest expense of 52% and 56%, respectively.

Net interest spread is the
difference between the average rates on interest-earning assets and the average rates on interest-bearing liabilities. Net interest margin represents net interest income divided by average earning assets. These ratios can also be used to analyze net
interest income. Since a portion of the Companys funding is derived from interest-free sources, primarily demand deposits, other liabilities and stockholders equity, the effective rate paid for all funding sources is lower than the rate
paid on interest-bearing liabilities alone.

As Table 1 indicates, the net interest spread declined 24 basis points to 2.95% in the second
quarter of 2006 from 3.19% in the second quarter of 2005. The net interest margin was 3.40% in the second quarter of 2006, a decrease of 12 basis points from 3.52% in the second quarter of 2005. As Table 2 indicates, the interest rate spread for the
six months ended June 30, 2006 declined 26 basis points from 3.24% in the prior year period to 2.98%. The net interest margin decreased 12 basis points to 3.42% from 3.54% for the year-to-date periods ended June 30, 2006 and 2005,
respectively. The declines in spread and margin for both periods were driven by higher funding costs, the result of continued increases in short-term interest rates and deposit attraction strategies.

The level of net interest income is the result of the relationship between the 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 can be segregated to analyze the period-to-period changes in net
interest income. Changes due to rate/volume variances 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. Tables 3 and 4 analyze the
changes attributable to the volume and rate components of net interest income.

Changes due to volume - In the second quarter
of 2006, net interest income (FTE) increased due to average volume by $2.8 million when compared to the second quarter of 2005. This increase was comprised of a $4.8 million increase in interest income that was partially offset by a $2.0 million
increase in interest expense.



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The $4.8 million increase in interest income was driven by a $403 million or 12% increase in average
loans. The growth in average loans came from an increase of $355 million in commercial real estate and commercial lending driven mostly by the Branch Expansion. Average consumer loan balances increased $767,000 compared to the prior year quarter,
and average residential real estate loans increased $47 million.

The increase in average loans was partially funded by a $183 million, or
6%, increase in average bank-issued deposits. The increase in average bank-issued deposits was attributable to the Companys Deposit Growth and Branch Expansion initiatives. Average wholesale funding increased $99 million or 8%.

For the first six months of 2006, net interest income increased due to average volume by $6.6 million when compared to the same period in 2005. This was
comprised of an increase of $11.0 million in interest income that was partially offset by a $4.4 million increase in interest expense. Average loans over this period increased $425 million or 13%. Average bank-issued deposits increased $275 million
or 10% while average wholesale funding increased $51 million or 4%.

Changes due to rate - During the second quarter of 2006,
net interest income (FTE) declined due to average rates by $1.5 million when compared with the same quarter in 2005. This decline was comprised of a $12.3 million increase in interest expense that was partly offset by a $10.8 million increase in
interest income. Both loan yields and funding costs were affected by eight 25 basis point increases in the federal funds (Fed Funds) rate that occurred since June 30, 2005.

The yield for second quarter of 2006 on average earning assets increased 89 basis points to 6.79% compared to 5.90% in the second quarter of 2005. This was primarily attributable to a 109 basis
point increase in the yield on average loans due to increasing loan volumes and repricing of variable rate loans in the rising rate environment.

The rate paid for the second quarter of 2006 on average interest bearing liabilities increased 113 basis points, compared to second quarter of 2005, as a result of increases in short term rates and lengthening of the repricing term of the
liabilities. All categories of liabilities, except long-term borrowings, experienced increased rates, the largest being interest-bearing demand and savings accounts due to increases in short-term interest rates and promotional deposit pricing as
part of the Deposit Growth initiative.

For the first six months of 2006, net interest income declined due to average rates by $3.4
million. This decline was comprised of a $24.6 million increase in interest expense that was partly offset by a $21.2 million increase in interest income. The average rates paid on interest bearing liabilities increased by 114 basis points while the
yield on earning assets increased by 88 basis points.

Like most financial institutions, AMCORE has an exposure to changes in both
short-term and long-term interest rates. The Company expects a more stable margin for the remainder of this year, based on improved discipline in its deposit pricing strategy and the mitigation of the asset and liability mismatch undertaken during
2006. Some modest compression due to narrowing loan spreads and some remaining modest liability sensitivity will continue. Among those factors that could cause margin and spread not to perform as anticipated by the Company include: greater and more
frequent than anticipated changes in interest rates, including the impact of basis risk between various interest rate indices, changes in the shape of the yield curve, the effect of prepayments or renegotiated rates, increased price competition on
both deposits and loans, promotional pricing on deposits, changes in the mix of earning assets and the mix of liabilities, including greater than anticipated use of wholesale sources to fund the Branch Expansion, and greater than expected loan
delinquencies resulting in non-accrual status. Over a one-year horizon, AMCORE expects that its interest-rate risk will be greater during a period of rising interest rates than it will be during a period of declining interest rates.

Provision for Loan Losses

Loans, the
Companys largest income earning asset category, are periodically evaluated by management in order to establish an estimated allowance (Allowance) for loan losses that are probable as of the respective reporting date and considered adequate to
absorb probable losses. This evaluation includes specific loss estimates on certain individually reviewed loans where it is probable that the Company will be unable to collect all of the amounts due (principal or interest) according to the
contractual terms of the loan agreement (impaired loans) and statistical loss estimates for loan groups or pools that are based on historical loss experience, as adjusted for other loss estimates that are based upon the size, quality, and
concentration characteristics of the various loan portfolios, adverse situations that may affect a



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borrowers ability to repay, and current economic and industry conditions, among other things. Additions to the Allowance are charged against earnings
for the period as a provision for loan losses (Provision). Conversely, this evaluation could result in a decrease in the Allowance and Provision.

Actual loan losses are charged against and reduce the Allowance when management believes that the collection of principal will not occur. Unpaid interest attributable to prior years for loans that are placed on non-accrual status is also
charged against and reduces the Allowance. Unpaid interest for the current year for loans that are placed on non-accrual status is charged against and reduces the interest income previously recognized. Subsequent recoveries of amounts previously
charged to the Allowance, if any, are credited to and increase the Allowance. The Allowance is also subject to periodic examination by regulators whose review includes a determination as to its adequacy to absorb probable losses.

The Provision was $2.3 million in the second quarter of 2006, a decrease of $1.2 million or 36% from $3.5 million in the second quarter of 2005. The
decline was primarily due to lower net charge-offs. Net charge-offs in the second quarter of 2006 were $2.4 million or 25 basis points of average loans on an annualized basis, compared to $4.0 million or 47 basis points of average loans during the
same period in 2005.

For the six month period ending June 30, 2006, the Provision declined $1.8 million when compared to the first
six months of 2005, also reflecting lower net charge-offs. Net charge-offs were $4.4 million, or 24 basis points of average loans on an annualized basis, for the six month period ending June 30, 2006, compared to $6.5 million or 39 basis points
of average loans during the same period in 2005.

Non-Interest Income

Total non-interest income is comprised primarily of fee-based revenues from investment management and trust, bank-related service charges on deposits and mortgage banking income. Net security
gains or losses, gains on loan sales, increases in cash surrender value (CSV) and death benefits on Bank and Company owned life insurance (COLI), brokerage commission income and bankcard fee income are also included in this category.

Overview - Non-interest income, including net security gains, totaled $17.5 million in the second quarter of 2006, an increase of $1.5
million or 10% from $15.9 million in the second quarter of 2005. The increase was attributable to a $734,000 increase in service charges on deposits, a $648,000 increase in mortgage banking income, a $538,000 increase in other non-interest income, a
$304,000 increase in bankcard fee income and a $224,000 increase in investment management and trust income. These increases were partly offset by a decrease of $455,000 in net security gains and a decrease of $411,000 in COLI income.

On a year-to-date basis, non-interest income increased $1.9 million to $33.2 million in 2006 compared to $31.3 million in 2005. Increases of $1.1
million, $565,000 and $536,000 occurred in service charges on deposits, mortgage banking income and bankcard fee income, respectively. These increases were partially offset by a decline of $390,000 in COLI income.

Investment management and trust income - Investment management and trust income includes trust services, investment management, estate
administration, financial planning, and employee benefit plan recordkeeping and administration services. Investment management and trust income totaled $4.0 million in the second quarter of 2006, an increase of $224,000 or 6%, from $3.7 million in
the second quarter of 2005. The increase for the quarter was primarily due to an increase in estate administration fees. For the six month period ended June 30, 2006, investment management and trust income declined $72,000 from $7.7 million in
2005 to $7.6 million.

As of June 30, 2006, total assets under administration were $2.5 billion, compared to $2.6 billion at
December 31, 2005 and $4.5 billion at June 30, 2005. The decline from June 30, 2005 reflects the combined impact of the Federated and West Banc transactions.

Service charges on deposits - Service charges on deposits, currently the Companys largest source of non-interest income, totaled $6.6 million in the second quarter of 2006, a
$734,000 or 13% increase over $5.9 million in the second quarter of 2005. For the first six months of 2006, service charges on deposits were $12.2 million, an increase of $1.1 million or 10% over the $11.0 million in the prior year period. Service
charges on personal deposit accounts were the



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primary driver of the increases for both the quarter and year-to-date periods and were impacted by higher deposit balances resulting from the Companys
Deposit Growth initiative. Enhancements to the Companys fee structure and waiver policies led to additional increases late in the second quarter of 2006 and are expected to continue.

Mortgage banking income - Mortgage banking income includes fees generated from the underwriting, originating and servicing of mortgage loans along with gains realized from the sale
of these loans, net of origination costs, servicing rights amortization and impairment.

Mortgage banking income was $1.1 million in the
second quarter of 2006, an increase of $648,000 from the second quarter of 2005. The prior year quarter included a mortgage servicing rights impairment charge of $702,000. The remaining change was due to lower gains on loans sold into the secondary
market that were nearly offset by higher net servicing income. Mortgage loan closings were $120 million during the second quarter of 2006 compared to $122 million in the prior year period. New purchase mortgage closings were 71% of total closings in
the second quarter of 2006, compared to 67% in the prior year quarter.

For the first six months of 2006, mortgage banking income was $2.3
million on closings of $200 million, compared to $1.7 million on closings of $207 million for the first six months of 2005, an increase of $565,000. Year-to-date 2005 included a $649,000 mortgage servicing rights impairment charge, compared to none
in the 2006 year-to-date period. The remaining change was due to lower gains on loans sold into the secondary market that were nearly offset by higher net servicing income. New purchase mortgage closings were 67% of total closings for the 2006
year-to-date period compared to 61% for the prior year same period.

The Company expects continued growth of new purchase mortgages with
additional mortgage originators, primarily in the Branch Expansion markets. New purchase mortgage growth could be negatively affected by a number of factors beyond the Companys control, including heightened competition, higher mortgage
interest rates, declines in new housing construction and adverse regulatory developments.

As of June 30, 2006, the carrying value of
AMCOREs capitalized mortgage servicing rights was $13.9 million, with no impairment valuation allowance. This compares to $12.4 million at June 30, 2005, net of the $702,000 impairment valuation. The unpaid principal balance of mortgage
loans serviced for others was $1.4 billion and $1.3 billion as of June 30, 2006, and 2005, respectively. The net carrying value of the Companys capitalized mortgage servicing rights, as a percentage of the unpaid principal balance of
mortgage loans serviced for others, was 0.98% and 0.94% as of June 30, 2006 and 2005, respectively.

COLI income - COLI
income totaled $1.1 million in the second quarter of 2006, a $411,000 decrease from $1.6 million in the second quarter of 2005. The decrease was primarily due to declines in the value of certain underlying equity-related investments. Year-to-date in
2006, COLI income declined $390,000 or 16% to $2.1 million from $2.5 million in the prior year period. The decline was due to higher annual policy charges and the decline in value of underlying equity-related investments. AMCORE uses COLI as a
tax-advantaged means of financing its future obligations with respect to certain non-qualified retirement and deferred compensation plans in addition to other employee benefit programs. As of June 30, 2006, the CSV of COLI was $135 million,
compared to $130 million at June 30, 2005 and $132 million at December 31, 2005.

Other non-interest income -
Brokerage commission income, bankcard fee income, customer service fees, gain on sale of loans, net security gains and other non-interest income totaled $4.7 million in the second quarter of 2006, a $351,000 million or 8% increase from the second
quarter of 2005. The increase was attributable to higher deposit-related fees, which includes bankcard fees and other customer service fees, and favorable derivatives mark-to-market adjustments, reduced by lower net security gains. The combined
totals for the year-to-date periods ended June 30, 2006 and 2005 were $9.0 million and $8.3 million, respectively, an increase of $686,000 or 8%. The increase was primarily related to higher deposit related fees and favorable derivative
mark-to-market adjustments, as noted above. A larger cardholder base, a benefit of both the Branch Expansion and Deposit Growth initiatives, greater card utilization and an expanded ATM network contributed to the increase in bankcard fee income.
First quarter 2005 other non-interest income included a $280,000 gain from the merger of an ATM network in which the Bank held an interest.



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Operating Expenses

Overview - Total operating expense was $40.3 million in the second quarter of 2006, an increase of $4.9 million or 14%, from $35.4 million in the second quarter of 2005. For the first six months of 2006,
operating expense was $80.6 million, an increase of $10.4 million or 15%, from $70.2 million in the same period in 2005. The increases in both the quarter and year-to-date periods of 2006 are primarily due to increases in personnel costs and
professional fees.

The efficiency ratio was 68.48% in the second quarter of 2006, compared to 63.43% for the same period in 2005. On a
year-to-date basis, the efficiency ratio was 69.58% and 63.56% in 2006 and 2005, respectively. The efficiency ratio is calculated by dividing total operating expenses by revenues. Revenues are the sum of net interest income and non-interest income.

Personnel expense - Personnel expense, which includes compensation expense and employee benefits and is the largest
component of operating expenses, was $24.3 million in the second quarter of 2006, an increase of $3.3 million or 15% from $21.1 million in the second quarter of 2005. For the six month periods ending June 30, 2006 and 2005, personnel expense
totaled $49.4 million and $42.2 million, respectively, an increase of $7.2 million or 17%. The increase for both the quarter and year-to-date periods include the effects of the Branch Expansion, additional compliance personnel, severance costs and
stock based compensation expense. Due to the adoption of SFAS 123R, stock based compensation expense increased $701,000 in the second quarter of 2006 and $1.5 million for the first six months of 2006 compared to the respective prior year periods.

Professional fees - Professional fees include legal, consulting, auditing and external portfolio management fees and totaled
$2.7 million in the second quarter of 2006 compared to $1.1 million in the same period a year ago. The increase of $1.6 million was primarily attributable to increased costs for external assistance with regulatory compliance matters and for external
investment management expenses. Subsequent to its sale, IMG continues to provide certain investment management services for the Bank for a limited time. These services were also provided prior to the sale and were previously categorized as a
component of personnel expense. IMG results for prior year periods have been re-categorized as discontinued operations. The costs of outside assistance for compliance matters should moderate over the remainder of the year, while the expenses related
to IMG investment management services should be stable or slightly declining from this point forward.

Other operating
expense-Other operating expenses includes net occupancy expense, equipment expense, data processing expense, communication expense, advertising and business development expenses and other costs, and were a combined $13.3
million in both second quarters of 2006 and 2005. Increases in data processing and advertising and business development expenses were partly offset by lower other real estate owned expenses and lower depreciation and software costs related to the
Companys core data-processing equipment and systems. For the six month periods ending June 30, 2006 and 2005, other operating expenses were $26.9 million and $26.0 million, respectively, an increase of $943,000. The increase was primarily
due to higher loan processing and collection costs, data processing expenses, advertising and communication expenses, partly offset by gains on the sale of other real estate owned and lower depreciation and software costs related to the
Companys core data-processing equipment and systems.

Income taxes

Income tax expense was $4.8 million and $4.7 million in the second quarters of 2006 and 2005, respectively. Income taxes increased despite a decline in pre-tax earnings due to a decline in
tax-exempt earnings. For the six month period ended June 30, 2006, income tax expense totaled $9.1 million, an $834,000 decrease from the $10.0 million in the same period of 2005. The decrease was mainly due to lower income before taxes.

The effective tax rates were 29.8% and 28.1% in the second quarters of 2006 and 2005, respectively, and were 29.4% and 29.1% for the six
months ended June 30, 2006 and 2005, respectively. Effective tax rates are lower than the statutory tax rates due primarily to investments in tax-exempt municipal bonds and increases in CSV and death benefits on COLI that are tax exempt.

Discontinued Operations

As a result of the Federated and West Banc transactions (see Increasing Investment Management and Trust Income discussion), the Company has reclassified the results of IMG for the current and prior periods to discontinued operations.



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EARNINGS REVIEW BY BUSINESS SEGMENT

AMCOREs internal reporting and planning process focuses on four primary lines of business (Segment(s)): Commercial Banking, Retail Banking, Investment Management and Trust, and
Mortgage Banking. Note 11 of the Notes to Consolidated Financial Statements presents a condensed income statement and total assets for each Segment.

The financial information presented was derived from the Companys internal profitability reporting system that is used by management to monitor and manage the financial performance of the Company. This
information is based on internal management accounting policies which have been developed to reflect the underlying economics of the Segments and, to the extent practicable, to portray each Segment as if it operated on a stand-alone basis. Thus,
each Segment, in addition to its direct revenues, expenses, assets and liabilities, includes an allocation of shared support function expenses. The Commercial, Retail and Mortgage Banking Segments also include funds transfer adjustments to
appropriately reflect the cost of funds on loans made and funding credits on deposits generated. Apart from these adjustments, the accounting policies used are similar to those described in Note 1 of the Notes to Consolidated Financial Statements
included in the Form 10-K Annual Report for the year ended December 31, 2005.

Since there are no comprehensive authorities for
management accounting equivalent to U.S. generally accepted accounting principles, the information presented is not necessarily comparable with similar information from other financial institutions. In addition, methodologies used to measure, assign
and allocate certain items may change from time-to-time to reflect, among other things, accounting estimate refinements, changes in risk profiles, changes in customers or product lines, and changes in management structure.

Total Segment results differ from consolidated results primarily due to inter-segment eliminations, certain corporate administration costs, and items not
otherwise allocated in the management accounting process and treasury and investment activities. The impact of these items is aggregated to reconcile the amounts presented for the Segments to the consolidated results and is included in the
Other column of Note 11 of the Notes to Consolidated Financial Statements.

Commercial Banking

The Commercial Banking Segment (Commercial) provides commercial banking services to middle market and small business customers through the Banks
full service branch and LBO locations. The services provided by this Segment include lending, business checking and deposits, treasury management and other traditional as well as electronic commerce services.

Overview - Commercial represented 70% and 75% of total Segment earnings in the second quarter of 2006 and 2005, respectively.
For the six month periods ended June 30, 2006 and 2005, Commercial represented 74% and 76%, respectively, of total Segment earnings. Commercial total assets were $3.1 billion at June 30, 2006 and represented 56% of total consolidated
assets. This compares to $2.7 billion and 52%, respectively, at June 30, 2005.

Commercial earnings for the second quarter of 2006 and
2005 were $7.9 million and $7.6 million, respectively, an increase of $276,000 or 4%. Year-to-date earnings in 2006 were $15.8 million, compared to $15.1 million in the same period in 2005, an increase of $675,000 or 4%. Higher net interest income
and lower provision for loan losses, partially reduced by higher non-interest expenses and income taxes, were the primary reasons for the increases for both the quarter and year-to-date periods.

Net interest income increased $1.8 million and $4.2 million for the three and six month periods ended June 30, 2006, respectively, compared to the
same periods in 2005. Both periods experienced increased interest income reduced by increased interest expense adjusted for net cost of fund allocations. The increase in interest income was attributable to higher average commercial real estate and
commercial loan volumes, and increased yields net of higher interest expense. The increase in interest expense, as adjusted for net cost of fund allocations, was primarily due to the increased funding needs associated with the loan growth combined
with rising interest rates.



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The Provision declined $1.1 million in the second quarter of 2006 from $2.4 million for the same period
of 2005, and declined $1.8 million for the year-over-year periods. The decrease in the quarter and year-to-date Provision was primarily due to lower net charge-offs.

Non-interest expense increased $2.5 million in the second quarter of 2006 compared to the second quarter of 2005. On a year-to-date basis, the increase was $4.9 million. The increases were largely due to higher
personnel costs associated with Branch Expansion, annual increases, and stock based compensation expense as well as higher loan processing and collection expenses.

Income taxes increased $176,000 and $431,000 for the three and six month periods of 2006, respectively, compared to the same periods in 2005 due to higher pre-tax earnings.

Retail Banking

The Retail Banking
Segment (Retail) provides retail-banking services to individual customers through the Banks branch locations in northern Illinois and southern Wisconsin. The services provided by this Segment include direct and indirect lending, checking,
savings, money market and CD accounts, safe deposit rental, ATMs, and other traditional and electronic commerce services.

Overview - Retail represented 28% and 26% of total Segment earnings in the second quarter of 2006 and 2005, respectively. For the six month periods ended June 30, 2006 and 2005, Retail represented 24% and 22%,
respectively, of total Segment earnings. Retail total assets were $649 million at June 30, 2006 and represented 12% of total consolidated assets. This compares to $654 million and 13% at June 30, 2005.

Retail earnings for the second quarter of 2006 were $3.1 million, an increase of $518,000 or 20% from the second quarter of 2005. Year-to-date earnings
in 2006 were $5.2 million, compared to $4.4 million in the same period in 2005, an increase of $821,000 or 19%. The increase for the quarter and year-to-date periods was due to higher net interest income and non-interest income partly offset by
higher non-interest expense and income taxes.

Net interest income increased by $1.7 million and $3.7 million for the three and six month
periods ended June 30, 2006, compared to the same periods in 2005. Both periods experienced increased funding credits on deposits generated due to Deposit Growth and higher interest income. These were partially offset by higher interest expense
due to increasing short-term interest rates.

Non-interest income increased by $741,000 in the second quarter of 2006 compared to the same
period a year ago and increased $1.4 million for the year-to-date period, both the result of increased deposit service charges.

Non-interest expense increased $1.3 million in the second quarter of 2006 compared to the second quarter of 2005. On a year-to-date basis, the increase was $3.3 million. The increases were largely due to increased personnel costs associated
with Branch Expansion, annual increases, and stock based compensation expenses, as well as higher loan processing expenses.

Income taxes
increased $323,000 in the second quarter of 2006 compared to the same period in 2005 and year-to-date 2006 income tax expense was $526,000 higher than the prior year period, both due to increased pre-tax earnings.

Investment Management and Trust

The
Investment Management and Trust Segment (IMT) provides wealth management services which include trust services, investment management, estate administration, financial planning, employee benefit plan recordkeeping and administration and brokerage
services.

Overview - IMT represented 2% and 4% of total segment earnings in both the second quarter and year-to-date periods
of 2006 and 2005, respectively. IMT total assets were $14 million at June 30, 2006 and represented less than 1% of total consolidated assets. At June 30, 2005, IMT total assets were $17 million, also less than 1% of total consolidated
assets.

IMT reported income from continuing operations of $296,000 in the second quarter of 2006, a $61,000 decline from the second
quarter of 2005 earnings from continuing operations of $357,000. On a year-to-date basis, income from



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continuing operations declined $440,000 from the prior year period. The decline was primarily attributable to higher non-interest expense net of lower income
taxes.

The increases in non-interest expenses were due to higher personnel costs and professional fees. Higher personnel costs included
stock-based compensation expense. Part of the IMG sale transaction included an agreement for IMG to continue to provide certain investment management services for a limited time. While these services mirror much of the services rendered prior to the
sale, the prior year expenses were a component of personnel expense for IMG that have been re-categorized as discontinued operations. The current period expenses appear as professional fees in continuing operations. Income taxes declined for both
periods due to lower earnings on continuing operations before taxes.

The loss from discontinued operations in the second quarter and
year-to-date periods of 2006 of $11,000 and $80,000, respectively, included additional expense incurred related to the sale of IMG.

Mortgage Banking

The Mortgage Banking Segment (Mortgage) provides a variety of mortgage lending products to meet its
customers needs. It sells most of the long-term, fixed-rate loans which it originates to the secondary market and continues to service most of the loans sold.

Overview - Mortgage represented less than 1% of total Segment earnings in each of the second quarters and year-to-date periods of 2006 and 2005. Mortgage total assets were $289 million at June 30,
2006 and represented 5% of total consolidated assets. This compares to $252 million and 5% at June 30, 2005.

Mortgage results for the
second quarter of 2006 reflected a loss of $51,000, an increase of $443,000 over the second quarter of 2005 loss of $494,000. For the first six months of 2006, mortgage results reflected a loss of $94,000 compared to a loss of $402,000 in the same
period of 2005, an improvement of $308,000. The improved earnings were due to higher non-interest income and lower provision expense, which were partially offset by lower net interest income and lower tax benefits.

The decline in net interest income was primarily due to increased net cost of funds allocations, the result of increasing short-term interest rates. The
increased cost of funds allocations more than offset the increases in interest income, which resulted from increased real estate loan volumes and higher yields. The decrease in provision was due to lower net charge-offs. The increase in non-interest
income was primarily due to the prior year mortgage servicing rights impairment charge of $702,000 partly offset by lower gains on the sales of mortgage loans into the secondary market during a period of rising interest rates. The increase in
non-interest expense was primarily due to higher personnel costs, the result of Branch Expansion and stock-based compensation expense. Lower income tax benefits were due to lower pre-tax losses.

BALANCE SHEET REVIEW

Total assets
were $5.4 billion at June 30, 2006, an increase of $80 million or 1% from December 31, 2005. Total liabilities increased $84 million over the same period and stockholders equity decreased $4 million. The following discusses changes
in the major components of the Consolidated Balance Sheet since December 31, 2005.

Cash and Cash Equivalents - Cash and cash
equivalents increased $11 million from December 31, 2005 to June 30, 2006, as the cash provided by financing activities of $71 million and by operating activities of $15 million exceeded the cash used for investing activities of $75
million.

Securities Available for Sale - Total securities available for sale as of June 30, 2006 were $1.1 billion, a decrease
of $95 million or 8% from December 31, 2005. The decline was primarily attributable to lower U.S. Government sponsored enterprise (GSE) balances and the resale of $15 million of the Companys own issuance of a Trust Preferred security that
it had repurchased a few years ago. As a result of the sale, the Company realized an improvement in its regulatory capital, paid down short-term wholesale borrowings, and reduced the level of required capital. At June 30, 2006 and
December 31, 2005, the total securities available for sale portfolio comprised 21% and 23%, respectively, of



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total earning assets, including COLI. Among the factors affecting the decision to purchase or sell securities are the current assessment of economic and
financial conditions, including the interest rate environment, the liquidity needs of the Company and its pledging obligations. By not reinvesting cash flows from maturities and prepayments of investment securities, the Company expects to gradually
migrate its balance sheet to a lower proportion of investment securities.

Mortgage and asset backed securities, as of June 30, 2006,
totaled $823 million and represented 76% of total available for sale securities. The distribution of mortgage and asset backed securities includes $362 million of GSE mortgage-backed pass through securities, $436 million of GSE collateralized
mortgage obligations and $25 million of private issue collateral mortgage obligations, all of which are rated Aaa except for $10 million of securities rated B3.

The $1.1 billion of total securities available for sale includes gross unrealized gains of $2 million and gross unrealized losses of $40 million. Unrealized gains and unrealized losses is the difference between a
securitys fair value and carrying value. The fair value of a security is generally impacted by two factors, market risk and credit risk. Market risk is the exposure of the security to changes in interest rate. There is an inverse relationship
to changes in the fair value of the security with changes in interest rates, meaning that when rates increase the value of the security will decrease. Conversely, when rates decline the value of the security will increase. Credit risk arises from
the extension of credit to a counter-party, for example a purchase of corporate debt in security form, and the possibility that the counter-party may not meet its contractual obligations. The Companys policy is to primarily invest in
securities with low credit risk, such as U.S. Treasuries, U.S. government agencies (such as the Government National Mortgage Association or GNMA), government-sponsored enterprises (GSEs such as the Federal Home Loan
Mortgage Corporation or FHLMC), state and political obligations, and mortgage-backed securities. Unlike agency debt, GSE debt is not secured by the full faith and credit of the United States.

The combined effect of the Companys gross unrealized gains and gross unrealized losses, net of tax, is included as accumulated other comprehensive
income (OCI) in stockholders equity, as none of the securities with gross unrealized losses is considered other-than-temporarily impaired. If it were to be determined that an investment is impaired and the impairment is other-than-temporary,
an impairment loss is reclassified from OCI as a charge to earnings and a new carrying basis for the investment established.

For
comparative purposes, at December 31, 2005, gross unrealized gains of $3 million and gross unrealized losses of $24 million were included in the securities available for sale portfolio. For further analysis of the securities available
for sale portfolio, see Note 2 of the Notes to Consolidated Financial Statements.

Loans Held for Sale - At June 30,
2006, mortgage origination fundings awaiting delivery to the secondary market were $36 million, compared to $24 million at December 31, 2005. Residential mortgage loans are originated by the Mortgage Banking Segment, of which non-conforming
adjustable rate, fixed-rate and balloon residential mortgages are normally retained by the BANK. The conforming adjustable rate, fixed-rate and balloon residential mortgage loans are typically sold in the secondary market to eliminate interest rate
risk, as well as to generate gains on the sale of these loans and servicing income. Loans held for sale are recorded at the lower of cost or market value.

Loans - Loans represent the largest component of AMCOREs earning asset base. At June 30, 2006, total loans were $3.9 billion, an increase of $143 million or 8% on an annualized basis from
December 31, 2005, and represented 75% of total earning assets, including COLI. See Note 3 of the Notes to Consolidated Financial Statements.

Total commercial real estate loans, including real estate construction loans, increased $104 million or 10% annualized, commercial, financial and agricultural loans increased $21 million, or 6% annualized, and residential real estate loans
increased $15 million or 6% on an annualized basis. The increases were driven primarily by the Branch Expansion.

Goodwill- Total goodwill at June 30, 2006 was $6.1 million, unchanged from December 31, 2005.

Deposits -
Total deposits at June 30, 2006 were $4.2 billion, a decrease of $18 million when compared to December 31, 2005, due to a decrease of $141 million in bank-issued deposits which totaled $3.4 billion at the end of the second quarter of 2006.
The decrease in bank-issued deposits was mostly offset by an increase of $124 million in wholesale deposits. Bank-issued deposits represented 82% and 85% of total deposits at June 30, 2006 and December 31, 2005, respectively.



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Borrowings - Borrowings totaled $763 million at June 30, 2006 and were comprised of $398
million of short-term and $366 million of long-term borrowings. Comparable amounts at December 31, 2005 were $489 million and $170 million. While this represented a combined increase in borrowings of $104 million, it also reflected a strategic
repositioning of funding, as the $91 million decline in short-term borrowings was replaced with long-term borrowings. Coupled with the first quarter of 2006 sale of the longer-maturity investment securities discussed above, this allowed the Company
to mitigate a funding mismatch and reduce its interest rate risk sensitivity. See Notes 6 and 7 of the Notes to Consolidated Financial Statements.

AMCORE has $40 million of Trust Preferred securities outstanding through AMCORE Capital Trust I (Capital Trust). In the first quarter of 2006, $15 million, previously held by the Bank and disallowed as Tier 1 Capital,
were sold. Following the sale, the entire $40 million qualifies as Tier 1 capital for regulatory purposes. These securities pay cumulative cash distributions semiannually at an annual rate of 9.35% and are redeemable from March 25, 2007 until
March 25, 2017, at a declining premium of 104.675% to 100.00% of the principal amount. After March 25, 2017, they are redeemable at par until June 15, 2027, when redemption is mandatory.

Stockholders Equity - Total stockholders equity at June 30, 2006 was $395 million, a decrease of $4 million or 1% from
December 31, 2005. The decrease in stockholders equity was primarily due to an $11 million decrease in accumulated other comprehensive income (OCI) and an $8 million increase in treasury stock. The decline in OCI relates to changes in net
unrealized gains and losses on the investment securities available for sale portfolio. These declines in total stockholders equity were partly offset by an increase of $13 million in retained earnings. The $8 million increase in treasury stock was
due to the Repurchase Program and the redemption of shares under a pre-existing redemption agreement. See discussion below under Liquidity and Capital Management  Other uses of liquidity.

OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS

Off-Balance Sheet Arrangements

During the ordinary course of its business, the Company engages in
financial transactions that are not recorded on its Consolidated Balance Sheets, are recorded in amounts that are different than their full principal or notional amount, or are recorded on an equity or cost basis rather than being consolidated. Such
transactions serve a variety of purposes including management of the Companys interest rate risk, liquidity and credit concentration risks, optimization of capital utilization, meeting the financial needs of its customers and fulfilling
Community Reinvestment Act (CRA) obligations in the markets that it serves.

Auto loan sales - Structured as sales pursuant
to SFAS 140 Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities, the Auto Loan Sales are a component of the Companys liquidity and credit concentration risk management strategy. The Auto
Loan Sales are also helpful as a capital management tool.

In the Auto Loan Sales, indirect automobile loan receivables are transferred to
a multi-seller variable-interest entity (VIE). Since the Company is not the primary beneficiary of the VIE, consolidation is not required under the terms of Financial Interpretation No. (FIN) 46R, Consolidation of Variable Interest
Entities. As a result, the net carrying amount of the loans is removed from the Companys Consolidated Balance Sheets and certain retained residual interests are recorded. The Companys retained interests are subordinate to the
interests of investors in the VIE and are subject to prepayment risk, interest-rate risk and credit risk on the transferred auto loans. The Companys risk of loss attributable to credit and prepayment is limited to its interest in the Interest
Only Strip. Neither the investors nor the securitization trust have any further recourse to the Companys other assets. Interest rate risk could exceed the Companys interest in the Excess Spread, but such a possibility is not considered
probable as of June 30, 2006. The Company also retains the rights to service the loans that are sold.

As of June 30, 2006, the
balance of automobile loans serviced and not included on the Companys Consolidated Balance Sheets was $79 million compared to $111 million at December 31, 2005. The carrying value of retained interests was $5 million at June 30, 2006
and $7 million at December 31, 2005. See Note 5 of the Notes to Consolidated Financial Statements.



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Mortgage loan sales - The Company originates mortgage loans that it sells to the secondary
market. The Company typically retains the right to service the loans that are sold. As of June 30, 2006 and December 31, 2005, the unpaid principal balance of mortgage loans serviced for others was $1.4 billion. These loans are not
recorded on the Companys Consolidated Balance Sheets. The Company, as of June 30, 2006 and December 31, 2005 and in accordance with SFAS No 140, had recorded $14 million and $13 million, respectively, of capitalized mortgage
servicing rights. As of June 30, 2006 and December 31, 2005, there was no impairment valuation. See Note 4 of the Notes to Consolidated Financial Statements.

Derivatives - The Company uses derivative contracts to help manage its exposure to changes in interest rates and in conjunction with its mortgage banking operations. The derivatives used most often are
interest rate swaps, and on occasion caps, collars and floors (collectively Interest Rate Derivatives), mortgage loan commitments and forward contracts. As of June 30, 2006 and December 31, 2005, there were no caps, collars or
floors outstanding. Interest Rate Derivatives are contracts with a third-party (the Counter-party) to exchange interest payment streams based upon an assumed principal amount (the Notional Principal Amount). The Notional
Principal Amount is not advanced to/from the Counter-party. It is used only as a reference point to calculate the exchange of interest payment streams and is not recorded on the Consolidated Balance Sheets. The fair value of the derivatives are
marked-to-market in accordance with SFAS No. 138, Accounting for Derivatives Instruments and Hedging Activities. AMCORE does not have any derivatives that are held or issued for trading purposes but it does have some derivatives
that do not qualify for hedge accounting. AMCORE monitors credit risk exposure to the Counter-parties. All Counter-parties, or their parent company, have investment grade credit ratings and are expected to meet any outstanding interest payment
obligations.

The total notional amount of Interest Rate Derivatives outstanding was $173 million and $240 million as of June 30, 2006
and December 31, 2005, respectively. As of June 30, 2006, Interest Rate Derivatives had a net negative carrying and fair value of $1.6 million, compared to a net negative carrying and fair value of $4.1 million at December 31, 2005.
The decline in notional amounts, carrying amounts and fair value were attributable to the termination of two fair value hedges in first quarter 2006. The total notional amount of forward contracts outstanding for mortgage loans to be sold in the
secondary market was $47 million and $39 million as of June 30, 2006 and December 31, 2005, respectively. As of June 30, 2006, the forward contracts had a net positive carrying and fair value of $91,000, compared to a net negative
carrying and fair value of $332,000 at December 31, 2005. For further discussion of derivative contracts, see Notes 8 of the Notes to Consolidated Financial Statements.

Loan commitments and letters of credit - The Company, as a provider of financial services, routinely enters into commitments to extend credit to its BANK customers, including
performance and standby letters of credit. While these represent a potential outlay by the Company, a significant amount of the commitments may expire without being drawn upon. Commitments and letters of credit are subject to the same credit
policies, underwriting standards and approval process as loans made by the Company.

At June 30, 2006, and December 31, 2005,
liabilities in the amount of $276,000 and $183,000, respectively, representing the value of the guarantee obligations associated with certain of the financial and standby letters of credit, had been recorded in accordance with FIN 45. These amounts
are expected to be amortized into income over the lives of the commitments. The contractual amount of all letters of credit, including those exempted from the scope of FIN 45, was $216 million and $204 million at June 30, 2006 and
December 31, 2005, respectively. See Note 9 of the Notes to Consolidated Financial Statements.

The carrying value of mortgage loan
commitments recorded as a liability totaled $15,000 at June 30, 2006 compared to an asset of $150,000 at December 31, 2005. This amount represents the fair value of those commitments marked-to-market in accordance with SFAS 138 and in
accordance with Staff Accounting Bulletin No. 105. The total notional amount of mortgage loan commitments was $35 million at June 30, 2006 and $22 million at December 31, 2005. See Note 8 of the Notes to Consolidated Financial
Statements.

At June 30, 2006 and December 31, 2005, the Company had extended $966 million and $955 million, respectively, in
loan commitments other than the mortgage loan commitments and letters of credit described above. This amount represented the notional amount of the commitment. A liability of $963,000 has been recorded for estimated probable losses on unfunded
commitments outstanding at June 31, 2006 compared to $732,000 at December 31, 2005. Prior to the third quarter of 2005, this liability was included as part of the Companys Allowance.



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Equity investments - The Company has a number of non-marketable equity investments that
have not been consolidated in its financial statements but rather are recorded in accordance with either the cost or equity method of accounting. At June 30, 2006 and December 31, 2005, these investments included $5 million in private
equity fund investments that were reported under either the cost or equity method, depending on the percentage of ownership. Not included in the carrying amount were commitments to fund an additional $1.1 million and $1.3 million, respectively, at
some future date. At June 30, 2006, the Company also has recorded investments of $4 million, $20 million, and $92,000 respectively, in stock of the Federal Reserve Bank, the Federal Home Loan Bank (FHLB) and the Federal Agricultural Mortgage
Corporation. At December 31, 2005, these amounts were $4 million, $21 million and $112,000, respectively. These investments are recorded at amortized historical cost or fair value, as applicable, with income recorded when dividends are
declared.

Other investments, comprised of various affordable housing tax credit projects (AHTCP) and other CRA investments, totaled
approximately $833,000 and $407,000 at June 30, 2006 and December 31, 2005, respectively. Losses are limited to the remaining investment and there are no additional funding commitments on the AHTCPs or CRA investments by the Company. Those
investments without guaranteed yields were reported on the equity method, while those with guaranteed yields were reported using the effective yield method. The maximum exposure to loss for all non-marketable equity investments is the sum of the
carrying amounts plus additional commitments, if any.

Other investments - The Company also holds $1 million in a common
security investment in the Capital Trust, to which the Company has $41 million in long-term debt outstanding. The Capital Trust, in addition to the $1 million in common securities issued to the Company, has $40 million in preferred securities
outstanding. The $40 million in preferred securities were issued to non-affiliated investors in 1997 and are redeemable beginning in 2007. The $15 million in preferred securities previously acquired by the Bank were sold in the first quarter of
2006. In its Consolidated Balance Sheets, the Company reflects its $1 million common security investment on the equity method and reports the entire $41 million as outstanding long-term debt. For regulatory purposes, however, the $40 million in
preferred securities qualifies as Tier 1 capital.

Fiduciary and agency - The Companys subsidiaries also hold assets in
a fiduciary or agency capacity that are not included in the Consolidated Financial Statements because they are not assets of the Company. Total assets administered by the Company at June 30, 2006 were $2.5 billion and at December 31, 2005
were $2.6 billion.

Contractual Obligations

In the ordinary course of its business, the Company enters into certain contractual arrangements. These obligations include issuance of debt to fund operations, property leases and derivative transactions. During the
first six months of 2006, the Company entered into five operating lease agreements. There are no residual value guarantees on these leases and no lease termination penalties or acceleration clauses. A purchase contract in the amount of $1.6 million
for a land purchase was entered into during second quarter 2006 and is scheduled to close in 2007. Other than these transactions, there were no material changes in the Companys contractual obligations since the end of 2005. Amounts as of
December 31, 2005 are listed in the following table:



|                              |  |                        |           |                  |   |           |  |           |         |                   |   |         |  |   |        
|----------------------------- |  | ---------------------- | --------- | ---------------- | - | --------- |  | --------- | ------- | ----------------- | - | ------- |  | - | -------
|                              |  | Payments due by period
|Contractual Obligations       |  | Total                  |           | Less Than 1 Year |   | 1-3 Years |  | 3-5 Years |         | More Than 5 Years
|                              |  | (in thousands)        
|Time Deposits                 |  | $                      | 1,740,115 |                  | $ | 1,069,140 |  | $         | 501,382 |                   | $ | 138,387 |  | $ | 31,206 
|Long-Term Debt (1)            |  |                        | 168,862   |                  |   |          |  |           | 100,441 |                   |   | 432     |  |   | 67,809 
|Capital Lease Obligations (2) |  |                        | 2,795     |                  |   | 169       |  |           | 346     |                   |   | 345     |  |   | 1,935  
|Operating Leases              |  |                        | 29,792    |                  |   | 2,398     |  |           | 4,996   |                   |   | 3,809   |  |   | 18,589 
|Service Contracts (3)         |  |                        | 2,388     |                  |   | 597       |  |           | 1,194   |                   |   | 597     |  |   |       
|                              |  |                        |           |                  |   |           |  |           |         |                   |   |         |  |   |        
|Total                         |  | $                      | 1,943,772 |                  | $ | 1,072,304 |  | $         | 608,359 |                   | $ | 143,570 |  | $ | 119,539
|                              |  |                        |           |                  |   |           |  |           |         |                   |   |         |  |   |        

---

|(1) | Excludes Capital Lease Obligations.
|--- | -----------------------------------



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##### Table of Contents

|(2) | Includes related interest.
|--- | --------------------------



|(3) | Minimum payments on Bank investment portfolio management contract.
|--- | ------------------------------------------------------------------

ASSET QUALITY REVIEW AND CREDIT RISK MANAGEMENT

AMCOREs credit risk is
centered in its loan portfolio, which totaled $3.9 billion, or 75% of earning assets, including COLI on June 30, 2006. The objective in managing loan portfolio risk is to quantify and manage credit risk on a portfolio basis as well as reduce
the risk of a loss resulting from a customers failure to perform according to the terms of a transaction. To achieve this objective, AMCORE strives to maintain a loan portfolio that is diverse in terms of loan type, industry concentration and
borrower concentration.

The Company is also exposed to credit risk with respect to the majority of its $135 million investment in COLI.
AMCORE manages this risk by diversifying its holdings among various carriers and by periodic internal credit reviews. All carriers have Secure ratings from A. M. Best that range from a low of A (Excellent) to
A++ (Superior).

Allowance for Loan Losses  The Allowance is a significant estimate that is regularly
reviewed by management to determine whether or not the amount is considered adequate to absorb probable losses. If not, an additional Provision is made to increase the Allowance. Conversely, this review could result in a decrease in the Allowance.
This evaluation includes specific loss estimates on certain individually reviewed loans, statistical loss estimates for loan groups or pools that are based on historical loss experience, and loss estimates that are based upon the size, quality and
concentration characteristics of the various loan portfolios, adverse situations that may affect the borrowers ability to repay, and current economic and industry conditions.

The determination by management of the appropriate level of the Allowance amounted to $40.6 million at June 30, 2006, compared to $40.8 million at December 31, 2005. Decreases of $1.7
million for specific loss estimates on certain loans that are individually reviewed for impairment were partially offset by increases of $1.0 million in statistical loss estimates on loan pools based upon historical loss experience and $433,000 for
other loss estimates. Other loss estimates are based upon the size, quality and concentration characteristics of the various loan portfolios, adverse situations that may affect the borrowers ability to repay, and current economic and industry
conditions.

At June 30, 2006, the Allowance as a percent of total loans and of non-accrual loans was 1.05% and 165%, respectively.
These compare to the same ratios at December 31, 2005 of 1.10% and 188%. Net charge-offs were $4.4 million for the first six months of 2006, a decrease of $2.0 million from $6.5 million for the same period in 2005. This was 0.24% and 0.39% of
annualized average loans for the year-to-date periods of 2006 and 2005, respectively. Decreases included commercial loan net charge-offs of $1.6 million, residential real estate net charge-offs of $230,000 and consumer/installment net charge-offs of
$134,000.

Non-performing Assets - Non-performing assets consist of non-accrual loans, loans 90 days past due and still accruing,
foreclosed real estate and other repossessed assets. Non-performing assets totaled $30.7 million as of June 30, 2006, a decline of $264,000 or 0.8% from $31.0 million at December 31, 2005 and increased $1.8 million or 6% from $29.0 million
at June 30, 2005. The decrease since December 31, 2005 consisted of a $1.2 million decrease in non-performing loans, partly offset by a $934,000 increase in foreclosed assets. The decrease in non-performing loans consisted of $4.1 million
decrease in loans 90 days past due partially offset by a $2.9 million increase in non-accrual loans. The $1.8 million increase since June 30, 2005 consisted of a $2.4 million increase in non-performing loans partially offset by a $610,000
decline in foreclosed assets. Total non-performing assets represented 0.57%, 0.58% and 0.56% of total assets at June 30, 2006, December 31, 2005 and June 30, 2005, respectively.

Non-accrual loan totals include a $9.8 million commercial real estate credit that was added to non-accrual loans during the second quarter of 2006. The
credit is in the process of workout and the Company has assigned a specific allocation to reflect an estimated impairment loss as of June 30, 2006. While the Company strives to reflect all known risk factors in its evaluation, the ultimate loss
could differ materially from the current estimate. The Company expects the workout process to continue for the remainder of the calendar year 2006. See Item 7, Managements Discussion And Analysis of Financial Condition And Results Of
Operation, Critical Accounting Estimates, included in the Companys Form 10-K



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##### Table of Contents

Annual Report for the year ended December 31, 2005, for a discussion of the judgments and assumptions that are most critical in determining the adequacy
of the Allowance.

In addition to the amount of non-accruing and delinquent loans over 90 days past due, management is aware that other
possible credit problems of borrowers may exist. Credits are considered substandard assets due to either less than satisfactory performance history, lack of borrowers sound worth or paying capacity, or inadequate collateral. Loans classified
as substandard are monitored accordingly. As of June 30, 2006 and December 31, 2005, there were $945,000 and $1.1 million, respectively, in this risk category that were 60 to 89 days delinquent and $2.7 million and $3.7 million,
respectively, that were 30 to 59 days past due. In addition, as of June 30, 2006 and December 31, 2005, respectively, there were $834,000 and $12.4 million of loans that were current, but had loss allocations of $356,000 and $2.3 million.
Included in the December 31, 2005 total of $12.4 million of loans that were current was the $9.8 million commercial real estate loan that was placed on non-accrual during the second quarter 2006.

Concentration of Credit Risks

As
previously discussed, AMCORE strives to maintain a diverse loan portfolio in an effort to minimize the effect of credit risk. Summarized below are the characteristics of classifications that exceed 10% of total loans.

Commercial, financial, and agricultural loans were $840 million at June 30, 2006, and comprised 22% of gross loans, of which 0.66% were
non-performing. Annualized net charge-offs of commercial loans during the first six months of 2006 and 2005 were 0.32% and 0.46%, respectively, of the average balance of the category. There were no loan concentrations within this category in excess
of 10% of total loans.

Commercial real estate and construction loans were $2.2 billion at June 30, 2006, comprising 58% of gross
loans, of which 0.85% were classified as non-performing. Annualized net charge-offs of construction and commercial real estate loans during the first six months of 2006 and 2005 were 0.17% and 0.33%, respectively, of the average balance of the
category. This category included $524 million of loans to nonresidential building operators, which was 14% of total loans. There were no other loan concentrations within this category that exceeded 10% of total loans.

Residential real estate loans, which include home equity and permanent residential financing, totaled $475 million at June 30, 2006, and represented
12% of gross loans, of which 0.75% were non-performing. Annualized net charge-offs of residential real estate in the first six months of 2006 and 2005 were 0.10% and 0.22%, respectively, of the average balance in this category.

Installment and consumer loans were $314 million at June 30, 2006, and comprised 8% of gross loans, of which 0.26% were non-performing. Annualized
net charge-offs of consumer loans in the first six months of 2006 and 2005 were 0.71% and 0.79%, respectively, of the average balance of the category. Consumer loans are comprised primarily of in-market indirect auto loans and direct installment
loans. Indirect auto loans totaled $253 million at June 30, 2006. Both direct loans and indirect auto loans are approved and funded through a centralized department utilizing the same credit scoring system to provide a standard methodology for
the extension of consumer credit.

Contained within the concentrations described above, the Company has $1.3 billion of interest only
loans, of which $901 million are included in the construction and commercial real estate loan category and $414 million are included in the commercial, financial, and agricultural loan category. In general, these loans are well-secured with an
average maturity of less than two years. The Company does not have significant concentrations of negative amortization loans, high loan-to-value loans, option adjustable-rate mortgage loans or loans that initially have below market rates that
significantly increase after the initial period.

LIQUIDITY AND CAPITAL MANAGEMENT

Liquidity Management

Overview - Liquidity management is the process by which the Company, through its Asset and Liability Committee (ALCO) and treasury function, ensures that adequate liquid funds are available to meet its financial commitments on
a timely basis, at a reasonable cost and within acceptable risk tolerances.



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##### Table of Contents

Liquidity is derived primarily from bank-issued deposit growth and retention; principal and interest
payments on loans; principal and interest payments, sale, maturity and prepayment of investment securities; net cash provided from operations; and access to other funding sources. Other funding sources include brokered CDs, Fed Funds purchased
lines, Federal Reserve Bank discount window advances, FHLB advances, repurchase agreements, the sale or securitization of loans, balances maintained at correspondent banks and access to other capital markets. Bank-issued deposits, which exclude
wholesale deposits, are considered by management to be the primary, most stable and most cost-effective source of funding and liquidity. The Bank also has capacity, over time, to place additional brokered CDs as a source of mid-to long-term
funds.

Uses of liquidity include funding credit obligations to borrowers, funding of mortgage originations pending delivery to the
secondary market, withdrawals by depositors, repayment of debt when due or called, maintaining adequate collateral for public deposits, paying dividends to shareholders, payment of operating expenses, funding capital expenditures and maintaining
deposit reserve requirements.

During the first six months of 2006, wholesale funding, which includes borrowings and brokered deposits,
increased $228 million. Wholesale funding represented 28% of total assets as of June 30, 2006 compared to 24% at December 31, 2005. The Company remains confident of its ability to meet and manage its short and long-term liquidity needs.

Investment securities portfolio - Scheduled maturities of the Companys investment securities portfolio and the
prepayment of mortgage and asset backed securities represent a significant source of liquidity. Approximately $18 million, or 2%, of the securities portfolio will contractually mature during the remainder of 2006. This does not include mortgage and
asset backed securities since their payment streams may differ from contractual maturities because borrowers may have the right to prepay obligations, typically without penalty.

Loans - Funding of loans is the most significant liquidity need, representing 71% of total assets as of June 30, 2006. Since December 31, 2005, loans increased $143
million. Loans held for sale, which represents mortgage origination funding awaiting delivery to the secondary market, increased $12 million since December 31, 2005. The scheduled repayments and maturities of loans represent a substantial
source of liquidity. Loan growth from same-store and Branch Expansion continue to be the greatest liquidity need of the Company.

Bank-issued deposits - Bank-issued deposits typically are the most cost-effective and reliable source of liquidity for the Company. Since December 31, 2005, bank-issued deposits decreased $141 million. The decline was
partly due to seasonal factors and partly due to a decline in money market deposits placed by correspondent banks as higher-rate deposit attraction strategies by the Company gave way to a more market-oriented, spread-based deposit sales strategy.

Branch expansion - The Companys Branch Expansion strategy poses the greatest challenge to short and long-term
liquidity. The Branch Expansion has required, and will continue to require, other sources of liquidity to fund the expected loan growth net of expected deposit growth and the remaining $59 million authorized capital investment. Since inception, the
Branch Expansion has required the funding of $1.63 billion in loans while generating $701 million in deposits.

Parent
company - In addition to the overall liquidity needs of the consolidated Company, the parent company requires adequate liquidity to pay its expenses, repay debt when due, and pay stockholder dividends. Liquidity is primarily provided to the
parent through the Bank and other subsidiaries in the form of dividends. In the first six months of 2006, dividends from subsidiaries amounted to $20 million, compared to $17 million in the same period a year ago.

Other sources of liquidity - As of June 30, 2006, other sources of readily available liquidity totaled $879 million and included $214
million of Fed Funds lines, unused collateral sufficient to support $387 million in Federal Reserve Bank discount window advances, $265 million of unpledged debt investment securities, and $13 million of FHLB advances. These amounts totaled $1.1
billion at December 31, 2005 and also included $48 million available under a prior commercial paper and back-up line-of-credit arrangement. The Company also has capacity, over time, to place sufficient amounts of brokered CDs as a source of
mid- to long-term liquidity. The Banks indirect auto portfolio, which at June 30, 2006 was $253 million, is a potential source of liquidity through additional Auto Loan Sales, but declining volumes and aging of the portfolio decreases the
likelihood that the remaining portfolio would meet the eligibility



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##### Table of Contents

criteria established by the securitization trust. The Bank also has a home equity portfolio of $226 million. Certain of these loans could also be packaged
and securitized but the Bank has no current plans to do so.

Other uses of liquidity - At June 30, 2006, other potential
uses of liquidity totaled $1.2 billion and included $966 million in commitments to extend credit, $35 million in residential mortgage commitments primarily for sale to the secondary market, and $216 million in letters of credit. At December 31,
2005, these amounts also totaled $1.2 billion.

The Company entered into a stock redemption agreement (Redemption Agreement) on
October 16, 1989, as amended June 30, 1993, pursuant to Section 303 of the Internal Revenue Code to pay death taxes and other related expenses of certain stockholders. Such redemptions may be subject to bank regulatory agency
approvals or limited by debt covenant restrictions. During the second quarter of 2006, the Company redeemed 86,000 shares, at a cost of $2.6 million pursuant to the Redemption Agreement. At this level, regulatory approvals were not required and debt
covenant limitations did not apply.

Capital Management

Total stockholders equity at June 30, 2006, was $395 million, a decrease of $4 million or 1% from December 31, 2005. The decrease in stockholders equity was primarily due to
an $11 million decline in OCI and an $8 million increase in treasury stock partially offset by an increase in retained earnings of $13 million. The decline in OCI relates to changes in net unrealized gains and losses on the investment securities
available for sale portfolio. The increase in treasury stock was due to the Repurchase Program and the Redemption Agreement.

AMCORE paid
$9 million of cash dividends during the first six months of 2006, which represent $0.37 per share, or a dividend payout ratio of 42%. This compares to $0.34 per share paid during the first six months of 2005, which represent a payout ratio of 35%.
The book value per share remained flat at $16.06 at June 30, 2006 and at December 31, 2005.

In addition to the recently
announced Repurchase Program and the Redemption Agreement, the Company does repurchase shares in open-market and private transactions in accordance with Exchange Act Rule 10b-18. These repurchases are used to replenish the Companys treasury
stock for re-issuances related to stock options and other employee benefit plans. Also repurchased are direct repurchases from participants related to the administration of the Amended and Restated AMCORE Stock Option Advantage Plan. During the
first six months of 2006, the Company purchased 297,039 shares in open-market and private transactions at an average price of $30.79 per share.

AMCORE has outstanding $41 million of capital securities through the Capital Trust. Of the $41 million, $40 million qualifies as Tier 1 capital for regulatory capital purposes, which is the $41 million reduced by the $1 million of common
equity securities owned by the Company. Pursuant to regulations recently issued by the Federal Reserve Board, the capital securities are expected to continue to qualify as Tier 1 Capital.

As the following table indicates, AMCOREs total risk-based capital, Tier 1 capital and leverage ratio all significantly exceed the regulatory minimums, as of June 30, 2006. The Bank,
whose ratios are not presented below, is considered a well-capitalized institution based on regulatory guidelines.



|                                         |  |        |           |       |                         |   |        |   |         |  |      |  
|---------------------------------------- |  | ------ | --------- | ----- | ----------------------- | - | ------ | - | ------- |  | ---- | -
|                                         |  | Actual |           |       | Minimum CapitalAdequacy |  
|                                         |  | Amount |           | Ratio |                         |   | Amount |   | Ratio   | 
|Total Capital (to Risk Weighted Assets)  |  | $      | 492,865   |       | 11.03                   | % |        | $ | 357,398 |  | 8.00 | %
|Tier 1 Capital (to Risk Weighted Assets) |  | $      | 452,289   |       | 10.12                   | % |        | $ | 178,699 |  | 4.00 | %
|Tier 1 Capital (to Average Assets)       |  | $      | 452,289   |       | 8.40                    | % |        | $ | 215,337 |  | 4.00 | %
|Risk Weighted Assets                     |  | $      | 4,467,477 |       |                         |   |        |   |         |  |      |  
|                                         |  |        |           |       |                         |   |        |   |         |  |      |  
|Average Assets                           |  | $      | 5,383,419 |       |                         |   |        |   |         |  |      |  
|                                         |  |        |           |       |                         |   |        |   |         |  |      |  



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TABLE 1

ANALYSIS OF NET INTEREST INCOME AND AVERAGE BALANCE SHEET



|                                            |  |                                     |           |   |          |   |             |  |      |                |  |   |           |   |             |   |        |  |      |  
|------------------------------------------- |  | ----------------------------------- | --------- | - | -------- | - | ----------- |  | ---- | -------------- |  | - | --------- | - | ----------- | - | ------ |  | ---- | -
|                                            |  | For the Three Months ended June 30, |          
|                                            |  | 2006                                |           |   | 2005     |  
|                                            |  | AverageBalance                      |           |   | Interest |   | AverageRate |  |      | AverageBalance |  |   | Interest  |   | AverageRate |  
|                                            |  | (dollars in thousands)              |          
|Assets:                                     |  |                                     |           |   |          |   |             |  |      |                |  |   |           |   |             |   |        |  |      |  
|Investment securities (1) (2)               |  | $                                   | 1,145,757 |   |          | $ | 12,940      |  | 4.52 | %              |  | $ | 1,234,262 |   |             | $ | 14,170 |  | 4.59 | %
|Short-term investments                      |  |                                     | 6,570     |   |          |   | 87          |  | 5.31 | %              |  |   | 9,127     |   |             |   | 69     |  | 3.04 | %
|Loans held for sale                         |  |                                     | 26,420    |   |          |   | 341         |  | 5.16 | %              |  |   | 24,457    |   |             |   | 324    |  | 5.30 | %
|Loans:                                      |  |                                     |           |   |          |   |             |  |      |                |  |   |           |   |             |   |        |  |      |  
|Commercial                                  |  |                                     | 832,541   |   |          |   | 16,332      |  | 7.87 | %              |  |   | 755,104   |   |             |   | 12,005 |  | 6.38 | %
|Commercial real estate                      |  |                                     | 2,190,746 |   |          |   | 41,315      |  | 7.56 | %              |  |   | 1,913,179 |   |             |   | 30,698 |  | 6.44 | %
|Residential real estate                     |  |                                     | 479,585   |   |          |   | 8,122       |  | 6.78 | %              |  |   | 432,613   |   |             |   | 6,512  |  | 6.03 | %
|Consumer                                    |  |                                     | 317,362   |   |          |   | 5,500       |  | 6.95 | %              |  |   | 316,595   |   |             |   | 5,230  |  | 6.63 | %
|                                            |  |                                     |           |   |          |   |             |  |      |                |  |   |           |   |             |   |        |  |      |  
|Total loans (1) (3)                         |  | $                                   | 3,820,234 |   |          | $ | 71,269      |  | 7.48 | %              |  | $ | 3,417,491 |   |             | $ | 54,445 |  | 6.39 | %
|                                            |  |                                     |           |   |          |   |             |  |      |                |  |   |           |   |             |   |        |  |      |  
|Total interest-earning assets               |  | $                                   | 4,998,981 |   |          | $ | 84,637      |  | 6.79 | %              |  | $ | 4,685,337 |   |             | $ | 69,008 |  | 5.90 | %
|Allowance for loan losses                   |  |                                     | (41,532   | ) |          |   |             |  |      |                |  |   | (41,620   | ) |             |   |        |  |      |  
|Non-interest-earning assets                 |  |                                     | 398,946   |   |          |   |             |  |      |                |  |   | 419,579   |   |             |   |        |  |      |  
|                                            |  |                                     |           |   |          |   |             |  |      |                |  |   |           |   |             |   |        |  |      |  
|Total assets                                |  | $                                   | 5,356,395 |   |          |   |             |  |      |                |  | $ | 5,063,296 |   |             |   |        |  |      |  
|                                            |  |                                     |           |   |          |   |             |  |      |                |  |   |           |   |             |   |        |  |      |  
|Liabilities and Stockholders Equity:       |  |                                     |           |   |          |   |             |  |      |                |  |   |           |   |             |   |        |  |      |  
|Interest-bearing demand & savings deposits  |  | $                                   | 1,779,003 |   |          | $ | 12,520      |  | 2.82 | %              |  | $ | 1,725,678 |   |             | $ | 7,781  |  | 1.81 | %
|Time deposits                               |  |                                     | 1,237,080 |   |          |   | 12,261      |  | 3.98 | %              |  |   | 1,107,470 |   |             |   | 8,084  |  | 2.93 | %
|                                            |  |                                     |           |   |          |   |             |  |      |                |  |   |           |   |             |   |        |  |      |  
|Total Bank issued interest-bearing deposits |  | $                                   | 3,016,083 |   |          | $ | 24,781      |  | 3.30 | %              |  | $ | 2,833,148 |   |             | $ | 15,865 |  | 2.25 | %
|Wholesale deposits                          |  |                                     | 703,222   |   |          |   | 8,233       |  | 4.70 | %              |  |   | 624,886   |   |             |   | 5,693  |  | 3.65 | %
|Short-term borrowings                       |  |                                     | 349,648   |   |          |   | 4,112       |  | 4.72 | %              |  |   | 505,468   |   |             |   | 3,847  |  | 3.05 | %
|Long-term borrowings                        |  |                                     | 340,833   |   |          |   | 5,121       |  | 6.03 | %              |  |   | 164,223   |   |             |   | 2,476  |  | 6.05 | %
|                                            |  |                                     |           |   |          |   |             |  |      |                |  |   |           |   |             |   |        |  |      |  
|Total interest-bearing liabilities          |  | $                                   | 4,409,786 |   |          | $ | 42,247      |  | 3.84 | %              |  | $ | 4,127,725 |   |             | $ | 27,881 |  | 2.71 | %
|Non-interest bearing deposits               |  |                                     | 486,103   |   |          |   |             |  |      |                |  |   | 485,796   |   |             |   |        |  |      |  
|Other liabilities                           |  |                                     | 62,286    |   |          |   |             |  |      |                |  |   | 60,129    |   |             |   |        |  |      |  
|Realized Stockholders' Equity               |  |                                     | 418,307   |   |          |   |             |  |      |                |  |   | 395,607   |   |             |   |        |  |      |  
|Other Comprehensive Loss                    |  |                                     | (20,087   | ) |          |   |             |  |      |                |  |   | (5,961    | ) |             |   |        |  |      |  
|                                            |  |                                     |           |   |          |   |             |  |      |                |  |   |           |   |             |   |        |  |      |  
|Total Liabilities & Stockholders Equity    |  | $                                   | 5,356,395 |   |          |   |             |  |      |                |  | $ | 5,063,296 |   |             |   |        |  |      |  
|                                            |  |                                     |           |   |          |   |             |  |      |                |  |   |           |   |             |   |        |  |      |  
|Net Interest Income (FTE)                   |  |                                     |           |   |          | $ | 42,390      |  |      |                |  |   |           |   |             | $ | 41,127 |  |      |  
|                                            |  |                                     |           |   |          |   |             |  |      |                |  |   |           |   |             |   |        |  |      |  
|Net Interest Spread (FTE)                   |  |                                     |           |   |          |   |             |  | 2.95 | %              |  |   |           |   |             |   |        |  | 3.19 | %
|                                            |  |                                     |           |   |          |   |             |  |      |                |  |   |           |   |             |   |        |  |      |  
|Interest Rate Margin (FTE)                  |  |                                     |           |   |          |   |             |  | 3.40 | %              |  |   |           |   |             |   |        |  | 3.52 | %
|                                            |  |                                     |           |   |          |   |             |  |      |                |  |   |           |   |             |   |        |  |      |  



|(1) | The interest on tax-exempt securities and tax-exempt loans is calculated on a tax equivalent basis (FTE) assuming a federal tax rate of 35%. FTE adjustments
totaled $1.1 million in 2006 and $1.2 million in 2005.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | The average balances of the securities are based on amortized historical cost.
|--- | ------------------------------------------------------------------------------



|(3) | The balances of nonaccrual loans are included in average loans outstanding. Interest on loans includes yield related loan fees of $776,000 and $651,000 for 2006
and 2005, respectively.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



44



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TABLE 2

ANALYSIS OF NET INTEREST INCOME AND AVERAGE BALANCE SHEET



|                                            |  |                                   |           |   |          |   |             |  |      |                |  |   |           |   |             |   |         |  |      |  
|------------------------------------------- |  | --------------------------------- | --------- | - | -------- | - | ----------- |  | ---- | -------------- |  | - | --------- | - | ----------- | - | ------- |  | ---- | -
|                                            |  | For the Six Months ended June 30, |          
|                                            |  | 2006                              |           |   | 2005     |  
|                                            |  | AverageBalance                    |           |   | Interest |   | AverageRate |  |      | AverageBalance |  |   | Interest  |   | AverageRate |  
|                                            |  | (dollars in thousands)            |           |   |         
|Assets:                                     |  |                                   |           |   |          |   |             |  |      |                |  |   |           |   |             |   |         |  |      |  
|Investment securities (1) (2)               |  | $                                 | 1,170,793 |   |          | $ | 26,583      |  | 4.54 | %              |  | $ | 1,233,011 |   |             | $ | 28,391  |  | 4.61 | %
|Short-term investments                      |  |                                   | 7,307     |   |          |   | 184         |  | 5.08 | %              |  |   | 7,011     |   |             |   | 100     |  | 2.88 | %
|Loans held for sale                         |  |                                   | 24,705    |   |          |   | 624         |  | 5.05 | %              |  |   | 22,777    |   |             |   | 557     |  | 4.89 | %
|Loans:                                      |  |                                   |           |   |          |   |             |  |      |                |  |   |           |   |             |   |         |  |      |  
|Commercial                                  |  |                                   | 822,173   |   |          |   | 31,515      |  | 7.73 | %              |  |   | 737,258   |   |             |   | 22,736  |  | 6.22 | %
|Commercial real estate                      |  |                                   | 2,175,842 |   |          |   | 80,231      |  | 7.44 | %              |  |   | 1,881,200 |   |             |   | 58,667  |  | 6.29 | %
|Residential real estate                     |  |                                   | 476,804   |   |          |   | 15,847      |  | 6.68 | %              |  |   | 428,377   |   |             |   | 12,654  |  | 5.93 | %
|Consumer                                    |  |                                   | 315,092   |   |          |   | 10,740      |  | 6.87 | %              |  |   | 318,130   |   |             |   | 10,333  |  | 6.55 | %
|                                            |  |                                   |           |   |          |   |             |  |      |                |  |   |           |   |             |   |         |  |      |  
|Total loans (1) (3)                         |  | $                                 | 3,789,911 |   |          | $ | 138,333     |  | 7.36 | %              |  | $ | 3,364,965 |   |             | $ | 104,390 |  | 6.25 | %
|                                            |  |                                   |           |   |          |   |             |  |      |                |  |   |           |   |             |   |         |  |      |  
|Total interest-earning assets               |  | $                                 | 4,992,716 |   |          | $ | 165,724     |  | 6.68 | %              |  | $ | 4,627,764 |   |             | $ | 133,438 |  | 5.80 | %
|Allowance for loan losses                   |  |                                   | (42,118   | ) |          |   |             |  |      |                |  |   | (41,845   | ) |             |   |         |  |      |  
|Non-interest-earning assets                 |  |                                   | 397,861   |   |          |   |             |  |      |                |  |   | 418,022   |   |             |   |         |  |      |  
|                                            |  |                                   |           |   |          |   |             |  |      |                |  |   |           |   |             |   |         |  |      |  
|Total assets                                |  | $                                 | 5,348,459 |   |          |   |             |  |      |                |  | $ | 5,003,941 |   |             |   |         |  |      |  
|                                            |  |                                   |           |   |          |   |             |  |      |                |  |   |           |   |             |   |         |  |      |  
|Liabilities and Stockholders Equity:       |  |                                   |           |   |          |   |             |  |      |                |  |   |           |   |             |   |         |  |      |  
|Interest-bearing demand & savings deposits  |  | $                                 | 1,804,942 |   |          | $ | 24,432      |  | 2.73 | %              |  | $ | 1,644,789 |   |             | $ | 13,109  |  | 1.61 | %
|Time deposits                               |  |                                   | 1,218,850 |   |          |   | 22,985      |  | 3.80 | %              |  |   | 1,104,349 |   |             |   | 15,396  |  | 2.81 | %
|                                            |  |                                   |           |   |          |   |             |  |      |                |  |   |           |   |             |   |         |  |      |  
|Total Bank issued interest-bearing deposits |  | $                                 | 3,023,792 |   |          | $ | 47,417      |  | 3.16 | %              |  | $ | 2,749,138 |   |             | $ | 28,505  |  | 2.09 | %
|Wholesale deposits                          |  |                                   | 681,781   |   |          |   | 15,439      |  | 4.57 | %              |  |   | 634,754   |   |             |   | 11,029  |  | 3.50 | %
|Short-term borrowings                       |  |                                   | 439,699   |   |          |   | 9,953       |  | 4.56 | %              |  |   | 529,190   |   |             |   | 7,373   |  | 2.81 | %
|Long-term borrowings                        |  |                                   | 258,872   |   |          |   | 8,002       |  | 6.23 | %              |  |   | 165,549   |   |             |   | 4,896   |  | 5.96 | %
|                                            |  |                                   |           |   |          |   |             |  |      |                |  |   |           |   |             |   |         |  |      |  
|Total interest-bearing liabilities          |  | $                                 | 4,404,144 |   |          | $ | 80,811      |  | 3.70 | %              |  | $ | 4,078,631 |   |             | $ | 51,803  |  | 2.56 | %
|Non-interest bearing deposits               |  |                                   | 479,674   |   |          |   |             |  |      |                |  |   | 475,183   |   |             |   |         |  |      |  
|Other liabilities                           |  |                                   | 65,440    |   |          |   |             |  |      |                |  |   | 61,505    |   |             |   |         |  |      |  
|Realized Stockholders Equity               |  |                                   | 416,405   |   |          |   |             |  |      |                |  |   | 391,580   |   |             |   |         |  |      |  
|Other Comprehensive Loss                    |  |                                   | (17,204   | ) |          |   |             |  |      |                |  |   | (2,958    | ) |             |   |         |  |      |  
|                                            |  |                                   |           |   |          |   |             |  |      |                |  |   |           |   |             |   |         |  |      |  
|Total Liabilities & Stockholders Equity    |  | $                                 | 5,348,459 |   |          |   |             |  |      |                |  | $ | 5,003,941 |   |             |   |         |  |      |  
|                                            |  |                                   |           |   |          |   |             |  |      |                |  |   |           |   |             |   |         |  |      |  
|Net Interest Income (FTE)                   |  |                                   |           |   |          | $ | 84,913      |  |      |                |  |   |           |   |             | $ | 81,635  |  |      |  
|                                            |  |                                   |           |   |          |   |             |  |      |                |  |   |           |   |             |   |         |  |      |  
|Net Interest Spread (FTE)                   |  |                                   |           |   |          |   |             |  | 2.98 | %              |  |   |           |   |             |   |         |  | 3.24 | %
|                                            |  |                                   |           |   |          |   |             |  |      |                |  |   |           |   |             |   |         |  |      |  
|Interest Rate Margin (FTE)                  |  |                                   |           |   |          |   |             |  | 3.42 | %              |  |   |           |   |             |   |         |  | 3.54 | %
|                                            |  |                                   |           |   |          |   |             |  |      |                |  |   |           |   |             |   |         |  |      |  



|(1) | The interest on tax-exempt securities and tax-exempt loans is calculated on a tax equivalent basis (FTE) assuming a federal tax rate of 35%. FTE adjustments
totaled $2.2 million in 2006 and $2.4 million in 2005.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | The average balances of the securities are based on amortized historical cost.
|--- | ------------------------------------------------------------------------------



|(3) | The balances of nonaccrual loans are included in average loans outstanding. Interest on loans includes yield related loan fees of $1.6 million and $1.3 million
for 2006 and 2005, respectively.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



45



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TABLE 3

ANALYSIS OF QUARTER-TO-QUARTER CHANGES IN NET INTEREST INCOME



|                                            |  |                                              |        |   |                              |   |        |   |  |   |        |  
|------------------------------------------- |  | -------------------------------------------- | ------ | - | ---------------------------- | - | ------ | - |  | - | ------ | -
|                                            |  | For the Three Months EndedJune 30, 2006/2005 |       
|                                            |  | Increase/(Decrease)Due to Change in          |        |   | Total Net Increase(Decrease) |  
|                                            |  | AverageVolume                                |        |   | AverageRate                  |   |       
|                                            |  | (in thousands)                               |       
|Interest Income:                            |  |                                              |        |   |                              |   |        |   |  |   |        |  
|Investment securities                       |  | $                                            | (1,003 | ) |                              | $ | (227   | ) |  | $ | (1,230 | )
|Short-term investments                      |  |                                              | (23    | ) |                              |   | 41     |   |  |   | 18     |  
|Loans held for sale                         |  |                                              | 26     |   |                              |   | (9     | ) |  |   | 17     |  
|Loans:                                      |  |                                              |        |   |                              |   |        |   |  |   |        |  
|Commercial                                  |  |                                              | 1,319  |   |                              |   | 3,008  |   |  |   | 4,327  |  
|Commercial real estate                      |  |                                              | 4,807  |   |                              |   | 5,810  |   |  |   | 10,617 |  
|Residential real estate                     |  |                                              | 748    |   |                              |   | 862    |   |  |   | 1,610  |  
|Consumer                                    |  |                                              | 13     |   |                              |   | 257    |   |  |   | 270    |  
|                                            |  |                                              |        |   |                              |   |        |   |  |   |        |  
|Total loans                                 |  |                                              | 6,862  |   |                              |   | 9,962  |   |  |   | 16,824 |  
|                                            |  |                                              |        |   |                              |   |        |   |  |   |        |  
|Total Interest-Earning Assets               |  | $                                            | 4,829  |   |                              | $ | 10,800 |   |  | $ | 15,629 |  
|                                            |  |                                              |        |   |                              |   |        |   |  |   |        |  
|Interest Expense:                           |  |                                              |        |   |                              |   |        |   |  |   |        |  
|Interest-bearing demand & savings deposits  |  | $                                            | 248    |   |                              | $ | 4,491  |   |  | $ | 4,739  |  
|Time deposits                               |  |                                              | 1,029  |   |                              |   | 3,148  |   |  |   | 4,177  |  
|                                            |  |                                              |        |   |                              |   |        |   |  |   |        |  
|Total Bank issued interest-bearing deposits |  |                                              | 1,082  |   |                              |   | 7,834  |   |  |   | 8,916  |  
|Wholesale deposits                          |  |                                              | 776    |   |                              |   | 1,764  |   |  |   | 2,540  |  
|Short-term borrowings                       |  |                                              | (1,420 | ) |                              |   | 1,685  |   |  |   | 265    |  
|Long-term borrowings                        |  |                                              | 2,654  |   |                              |   | (9     | ) |  |   | 2,645  |  
|                                            |  |                                              |        |   |                              |   |        |   |  |   |        |  
|Total Interest-Bearing Liabilities          |  | $                                            | 2,023  |   |                              | $ | 12,343 |   |  | $ | 14,366 |  
|                                            |  |                                              |        |   |                              |   |        |   |  |   |        |  
|Net Interest Income (FTE)                   |  | $                                            | 2,806  |   |                              | $ | (1,543 | ) |  | $ | 1,263  |  
|                                            |  |                                              |        |   |                              |   |        |   |  |   |        |  

The above analysis shows the changes in interest income (tax equivalent FTE) and
interest expense attributable to volume and rate variances. The change in interest income (tax equivalent) due to both volume and rate have been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of
the change in each. 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 or
interest-bearing liabilities as a total.



46



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##### Table of Contents

TABLE 4

ANALYSIS OF YEAR-TO-DATE CHANGES IN NET INTEREST INCOME



|                                            |  |                                             |        |   |                              |   |        |   |  |   |        |  
|------------------------------------------- |  | ------------------------------------------- | ------ | - | ---------------------------- | - | ------ | - |  | - | ------ | -
|                                            |  | For the Six Months Ended June 30, 2006/2005 |       
|                                            |  | Increase/(Decrease)Due to Change in         |        |   | Total Net Increase(Decrease) |  
|                                            |  | AverageVolume                               |        |   | AverageRate                  |   |       
|                                            |  | (in thousands)                              |       
|Interest Income:                            |  |                                             |        |   |                              |   |        |   |  |   |        |  
|Investment securities                       |  | $                                           | (1,418 | ) |                              | $ | (390   | ) |  | $ | (1,808 | )
|Short-term investments                      |  |                                             | 4      |   |                              |   | 80     |   |  |   | 84     |  
|Loans held for sale                         |  |                                             | 48     |   |                              |   | 19     |   |  |   | 67     |  
|Loans:                                      |  |                                             |        |   |                              |   |        |   |  |   |        |  
|Commercial                                  |  |                                             | 2,823  |   |                              |   | 5,956  |   |  |   | 8,779  |  
|Commercial real estate                      |  |                                             | 9,963  |   |                              |   | 11,601 |   |  |   | 21,564 |  
|Residential real estate                     |  |                                             | 1,514  |   |                              |   | 1,679  |   |  |   | 3,193  |  
|Consumer                                    |  |                                             | (100   | ) |                              |   | 507    |   |  |   | 407    |  
|                                            |  |                                             |        |   |                              |   |        |   |  |   |        |  
|Total loans                                 |  |                                             | 14,152 |   |                              |   | 19,791 |   |  |   | 33,943 |  
|                                            |  |                                             |        |   |                              |   |        |   |  |   |        |  
|Total Interest-Earning Assets               |  | $                                           | 11,044 |   |                              | $ | 21,242 |   |  | $ | 32,286 |  
|                                            |  |                                             |        |   |                              |   |        |   |  |   |        |  
|Interest Expense:                           |  |                                             |        |   |                              |   |        |   |  |   |        |  
|Interest-bearing demand & savings deposits  |  | $                                           | 1,385  |   |                              | $ | 9,938  |   |  | $ | 11,323 |  
|Time deposits                               |  |                                             | 1,724  |   |                              |   | 5,865  |   |  |   | 7,589  |  
|                                            |  |                                             |        |   |                              |   |        |   |  |   |        |  
|Total Bank issued interest-bearing deposits |  |                                             | 3,086  |   |                              |   | 15,826 |   |  |   | 18,912 |  
|Wholesale deposits                          |  |                                             | 866    |   |                              |   | 3,544  |   |  |   | 4,410  |  
|Short-term borrowings                       |  |                                             | (1,414 | ) |                              |   | 3,994  |   |  |   | 2,580  |  
|Long-term borrowings                        |  |                                             | 2,876  |   |                              |   | 230    |   |  |   | 3,106  |  
|                                            |  |                                             |        |   |                              |   |        |   |  |   |        |  
|Total Interest-Bearing Liabilities          |  | $                                           | 4,408  |   |                              | $ | 24,600 |   |  | $ | 29,008 |  
|                                            |  |                                             |        |   |                              |   |        |   |  |   |        |  
|Net Interest Income (FTE)                   |  | $                                           | 6,636  |   |                              | $ | (3,358 | ) |  | $ | 3,278  |  
|                                            |  |                                             |        |   |                              |   |        |   |  |   |        |  

The above analysis shows the changes in interest income (tax equivalent FTE) and
interest expense attributable to volume and rate variances. The change in interest income (tax equivalent) due to both volume and rate have been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of
the change in each. 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 or
interest-bearing liabilities as a total.



47



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##### Table of Contents

TABLE 5

ASSET QUALITY

The components of non-performing loans and foreclosed assets at June 30, 2006
and December 31, 2005 were as follows:



|                                                  |  |                |        |                  |   |       
|------------------------------------------------- |  | -------------- | ------ | ---------------- | - | ------
|                                                  |  | June 30,2006   |        | December 31,2005
|                                                  |  | (in thousands)
|Impaired loans:                                   |  |                |       
|Non-accrual loans                                 |  |                |        |                  |   |       
|Commercial                                        |  | $              | 6,321  |                  | $ | 4,483 
|Real estate                                       |  |                | 12,388 |                  |   | 13,083
|Other non-performing:                             |  |                |        |                  |   |       
|Non-accrual loans (1)                             |  |                | 5,830  |                  |   | 4,114 
|Loans 90 days or more past due and still accruing |  |                | 4,476  |                  |   | 8,533 
|                                                  |  |                |        |                  |   |       
|Total non-performing loans                        |  | $              | 29,015 |                  | $ | 30,213
|                                                  |  |                |        |                  |   |       
|Foreclosed assets:                                |  |                |        |                  |   |       
|Real estate                                       |  |                | 1,025  |                  |   | 621   
|Other                                             |  |                | 681    |                  |   | 151   
|                                                  |  |                |        |                  |   |       
|Total foreclosed assets                           |  | $              | 1,706  |                  | $ | 772   
|                                                  |  |                |        |                  |   |       
|Total non-performing assets                       |  | $              | 30,721 |                  | $ | 30,985
|                                                  |  |                |        |                  |   |       
|Troubled debt restructurings                      |  | $              | 13     |                  | $ | 13    
|                                                  |  |                |        |                  |   |       



|(1) | These loans are not considered impaired since they are part of a small balance homogeneous portfolio.
|--- | -----------------------------------------------------------------------------------------------------

An analysis of the allowance for loan losses for the periods ended June 30, 2006 and 2005 is presented below:



|                                                                                              |  |                                    |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|--------------------------------------------------------------------------------------------- |  | ---------------------------------- | ------ | - | -------------------------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                                                              |  | For the Three MonthsEnded June 30, |        |   | For the Six MonthsEnded June 30, |  
|                                                                                              |  | 2006                               |        |   | 2005                             |   |        | 2006 |  |   | 2005   |  
|                                                                                              |  | ($ in thousands)                   |        |   | ($ in thousands)                 |  
|Balance at beginning of period                                                                |  | $                                  | 40,733 |   |                                  | $ | 40,954 |      |  | $ | 40,756 |   |  | $ | 40,945 |  
|Charge-Offs:                                                                                  |  |                                    |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|Commercial, financial and agricultural                                                        |  |                                    | 441    |   |                                  |   | 679    |      |  |   | 1,442  |   |  |   | 2,101  |  
|Real estate - Commercial                                                                      |  |                                    | 1,279  |   |                                  |   | 2,532  |      |  |   | 1,994  |   |  |   | 3,207  |  
|Real estate - Residential                                                                     |  |                                    | 323    |   |                                  |   | 423    |      |  |   | 407    |   |  |   | 554    |  
|Installment and consumer                                                                      |  |                                    | 1,243  |   |                                  |   | 736    |      |  |   | 2,546  |   |  |   | 1,883  |  
|Direct leases                                                                                 |  |                                    |       |   |                                  |   | 49     |      |  |   |       |   |  |   | 49     |  
|                                                                                              |  |                                    |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|                                                                                              |  |                                    | 3,286  |   |                                  |   | 4,419  |      |  |   | 6,389  |   |  |   | 7,794  |  
|Recoveries:                                                                                   |  |                                    |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|Commercial, financial and agricultural                                                        |  |                                    | 55     |   |                                  |   | 150    |      |  |   | 139    |   |  |   | 465    |  
|Real estate - Commercial                                                                      |  |                                    | 125    |   |                                  |   | 10     |      |  |   | 185    |   |  |   | 118    |  
|Real estate - Residential                                                                     |  |                                    | 33     |   |                                  |   | 30     |      |  |   | 178    |   |  |   | 95     |  
|Installment and consumer                                                                      |  |                                    | 650    |   |                                  |   | 248    |      |  |   | 1,441  |   |  |   | 644    |  
|Direct leases                                                                                 |  |                                    |       |   |                                  |   |       |      |  |   |       |   |  |   |       |  
|                                                                                              |  |                                    |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|                                                                                              |  |                                    | 863    |   |                                  |   | 438    |      |  |   | 1,943  |   |  |   | 1,322  |  
|Net Charge-Offs                                                                               |  |                                    | 2,423  |   |                                  |   | 3,981  |      |  |   | 4,446  |   |  |   | 6,472  |  
|Provision charged to expense                                                                  |  |                                    | 2,250  |   |                                  |   | 3,502  |      |  |   | 4,250  |   |  |   | 6,002  |  
|                                                                                              |  |                                    |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|Balance at end of period                                                                      |  | $                                  | 40,560 |   |                                  | $ | 40,475 |      |  | $ | 40,560 |   |  | $ | 40,475 |  
|                                                                                              |  |                                    |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|Ratio of net-charge-offs during the period to average loans outstanding during the period (1) |  |                                    | 0.25   | % |                                  |   | 0.47   | %    |  |   | 0.24   | % |  |   | 0.39   | %
|                                                                                              |  |                                    |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  

|(1) | On an annualized basis.
|--- | -----------------------



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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As part of its normal operations,
AMCORE is subject to interest-rate risk on the interest-earning assets it invests in (primarily loans and securities) and the interest-bearing liabilities it funds with (primarily customer deposits, brokered deposits and borrowed funds), as well as
its ability to manage such risk. Fluctuations in interest rates may result in changes in the fair market values of AMCOREs financial instruments, cash flows and net income. Like most financial institutions, AMCORE has an exposure to changes in
both short-term and long-term interest rates.

While AMCORE manages other risks in its normal course of operations, such as credit and
liquidity risk, it considers interest-rate risk to be its most significant market risk. Other types of market risk, such as foreign currency exchange risk and commodity price risk, do not arise in the normal course of AMCOREs business
activities and operations. In addition, since AMCORE does not hold a trading portfolio, it is not exposed to significant market risk from trading activities. During second quarter 2006, there were no material changes in AMCOREs primary market
risk exposures. Based upon current expectations, no material changes are anticipated in the future in the types of market risks facing AMCORE.

Like most financial institutions, AMCOREs net income can be significantly impacted by external factors. These factors include, but are not limited to: overall economic conditions, policies and actions of regulatory authorities, the
amounts of and rates at which assets and liabilities re-price, variances in prepayment of loans and securities other than those that are assumed, early withdrawal of deposits, exercise of call options on borrowings or securities, competition, a
general rise or decline in interest rates, changes in the slope of the yield-curve, changes in historical relationships between indices and balance sheet growth. ALCO regularly reviews the assumptions being utilized in light of market conditions.

AMCOREs asset and liability management process is utilized to manage market and interest rate risk through structuring the balance
sheet and off-balance sheet positions to maximize net income while maintaining acceptable levels of risk to changes in market interest rates. While achievement of this goal requires a balance between earnings, liquidity and interest rate risk, there
are opportunities to enhance revenues through managed risk. Interest rate sensitivity analysis is performed monthly using various simulations with an asset/liability modeling system. These analyses are reviewed by the ALCO, whose actions attempt to
minimize any sudden or sustained negative impact that interest rate movements may have on net income. ALCO reviews the impact of liquidity, capital adequacy and rate sensitivity, among other things, and determines appropriate policy direction to
maintain or meet established ALCO guidelines.

Based upon an immediate increase in interest rates of 100 basis points and no change in the
slope of the yield curve, the potential decrease in pre-tax income for the twelve-month period beginning July 1, 2006 would be approximately 1.4% of base forecasted pre-tax income. Conversely, an immediate decrease in interest rates of 100
basis points and no change in the slope of the yield curve would result in a potential decrease in pre-tax income for the twelve-month period beginning July 1, 2006 of 0.5% of base forecasted pre-tax income. These analyses assume no growth in
assets or liabilities and replacement of maturing instruments with like-kind instruments. During the second quarter AMCORE changed its benchmark of net interest margin to pre-tax income. At December 31, 2005, the potential decrease in pre-tax
income for the 100 basis points immediate increase would have been 3.7% and the potential decrease in pre-tax income for the 100 basis points immediate decrease in rates would have been 1.9%.

The amounts and assumptions used in the rising and falling rate scenarios should not be viewed as indicative of expected actual results. In addition to rising or falling interest rates,
AMCOREs net income can be significantly impacted by a variety of external factors, such as those previously noted. In addition, as interest rates move, the ALCO is likely to adjust interest rate risk management strategies to limit, to the
extent possible, the adverse impact that such changes in interest rates might otherwise have on AMCOREs net income, as well as maximize potential positive impacts such movements might have.



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ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Companys management, with the participation of the Companys Chief Executive Officer and Chief Financial Officer, has evaluated the
effectiveness of the Companys disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the period
covered by this report. Based on such evaluation, the Companys Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Companys disclosure controls and procedures are effective.

Changes in Internal Controls

There have not been any changes in the Companys internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that
have materially affected, or are reasonable likely to materially affect, the Companys internal control over financial reporting.

PART II- Other Information

ITEM 1. Legal Proceedings

Management believes that no litigation is threatened or pending in which the
Company faces potential loss or exposure which will materially affect the Companys financial position or results of operations. For a discussion of the Banks expected entry into a Consent Order with the OCC, see Item 2,
Managements Discussion and Analysis of Financial Condition and Results of Operations  Regulatory Developments. Since the Companys subsidiaries act as depositories of funds, trustee and escrow agents, they occasionally are named as
defendants in lawsuits involving claims to the ownership of funds in particular accounts. This and other litigation is incidental to the Companys business.

ITEM 1A. Risk Factors

There has not been any material change in the risk factors disclosure from that
contained in the Companys 2005 10-K for the fiscal year ended December 31, 2005.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds



| | (c) | The following table presents information relating to all Company repurchases of common stock during the second quarter of 2006:
| | --- | -------------------------------------------------------------------------------------------------------------------------------

Issuer Purchases of Equity Securities



|                   |  |                                |  |                                 |       |                                                                             |   |                                                                                                   |  
|------------------ |  | ------------------------------ |  | ------------------------------- | ----- | --------------------------------------------------------------------------- | - | ------------------------------------------------------------------------------------------------- | -
|Period             |  | (a) Total # of SharesPurchased |  | (b) Average PricePaid per Share |       | (c) Total # of SharesPurchased asPart of PubliclyAnnounced Plansor
Programs |   | (d) Maximum # (orApprox. DollarValue) of Sharesthat May Yet BePurchased Underthe Plans
orPrograms
|April 1  30, 2006 |  | 4,610                          |  | $                               | 27.74 |                                                                             |  |                                                                                                   | 
|May 1  31, 2006   |  | 292,429                        |  |                                 | 30.84 |                                                                             |  |                                                                                                   | 
|June 1  30, 2006  |  |                               |  |                                 |      |                                                                             |  |                                                                                                   | 
|                   |  |                                |  |                                 |       |                                                                             |   |                                                                                                   |  
|Total              |  | 297,039                        |  | $                               | 30.79 |                                                                             |  |                                                                                                   | 
|                   |  |                                |  |                                 |       |                                                                             |   |                                                                                                   |  

The Companys Board of Directors authorized a share repurchase program on May 3, 2006.
The repurchase program allows the repurchase of up to 3 million shares for a 12-month period and will be executed through open market or privately negotiated purchases. The Company regularly repurchases shares in open-market transactions in
accordance with Exchange Act Rule 10b-18 through a limited group of brokers to replenish the Companys treasury stock for re-issuances related to stock option exercises and other employee benefit plans. Included in the repurchased shares above
are direct repurchases from participants, at their discounted price, related to the administration of the Amended and Restated AMCORE Stock Option Advantage Plan. Also included are 9,177 shares tendered to effect stock option exercise transactions.



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ITEM 4. Submission of Matters to a Vote of Security Holders



|(a) | AMCORE Financial, Inc. 2006 Annual Meeting of Stockholders was held on May 2, 2006.
|--- | -----------------------------------------------------------------------------------



|(c) | Matters voted upon at the Annual Meeting of Stockholders:
|--- | ---------------------------------------------------------

Proxies were solicited by AMCORE Financial, Inc. management for the purpose of electing four Class II directors. The following individuals were elected as directors:



|      |  |                      |  |            |  |                |  |                
|----- |  | -------------------- |  | ---------- |  | -------------- |  | ---------------
|Class |  | Name                 |  | Votes For  |  | Votes Withheld |  | Term Expiration
|II    |  | Kenneth E. Edge      |  | 20,480,232 |  | 350,095        |  | 2009           
|II    |  | John W. Gleeson      |  | 20,541,246 |  | 289,081        |  | 2009           
|II    |  | William R. McManaman |  | 20,548,713 |  | 281,614        |  | 2009           
|II    |  | Jack D. Ward         |  | 20,484,501 |  | 345,826        |  | 2009           

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 20,443,706 votes for, 299,997 votes against and 86,624 votes abstaining the ratification of the appointment.

ITEM 6. Exhibits



|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|3    |  | Amended and Restated Articles of Incorporation of AMCORE Financial, Inc., dated April 8, 1986 (Incorporated by reference to Exhibit 3 of AMCOREs Quarterly
Report on Form 10-Q for the quarter ended March 31, 1986); as amended May 3, 1988 to Article 8 (Incorporated by reference to AMCOREs definitive 1988 Proxy Statement dated March 18, 1988); and as amended May 1, 1990 to
Article 5 (Incorporated by reference to AMCOREs definitive 1990 Proxy Statement dated March 21, 1990).
|     | 
|3.1  |  | By-laws of AMCORE Financial, Inc., as amended February 11, 2004. (Incorporated by reference to Exhibit 3.2 of AMCOREs Annual Report on Form 10-K for the year ended
December 31, 2003).                                                                                                                                                                                                                                                                                                      
|     | 
|10.1 |  | Severance Agreement, Release and Waiver, dated July 10, 2006, between AMCORE Financial, Inc. and Joseph B. McGougan (Incorporated by reference to AMCOREs Form 8-K as
filed with the Commission on July 11, 2006).                                                                                                                                                                                                                                                                           
|     | 
|31.1 |  | Certification of CEO pursuant to Rule 13a-14 and Rule 15d-14 of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.                                                                                                                                                                                                                                                                                                                                       
|     | 
|31.2 |  | Certification of CFO pursuant to Rule 13a-14 and Rule 15d-14 of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.                                                                                                                                                                                                                                                                                                                                       
|     | 
|32.1 |  | Certification of CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                
|     | 
|32.2 |  | Certification of CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                



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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.
|      |  |                |  |                       
|Date: |  | August 9, 2006 |  |                        |  | By: |  | /s/ Donald H. Wilson                                
|      |  |                |  |                        |  |     |  | Donald H. Wilson                                    
|      |  |                |  |                        |  |     |  | Executive Vice President and Chief Financial Officer



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EXHIBIT INDEX



|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|3    |  | Amended and Restated Articles of Incorporation of AMCORE Financial, Inc., dated April 8, 1986 (Incorporated by reference to Exhibit 3 of AMCOREs Quarterly
Report on Form 10-Q for the quarter ended March 31, 1986); as amended May 3, 1988 to Article 8 (Incorporated by reference to AMCOREs definitive 1988 Proxy Statement dated March 18, 1988); and as amended May 1, 1990 to
Article 5 (Incorporated by reference to AMCOREs definitive 1990 Proxy Statement dated March 21, 1990).
|     | 
|3.1  |  | By-laws of AMCORE Financial, Inc., as amended February 11, 2004. (Incorporated by reference to Exhibit 3.2 of AMCOREs Annual Report on Form 10-K for the year ended
December 31, 2003).                                                                                                                                                                                                                                                                                                      
|     | 
|10.1 |  | Severance Agreement, Release and Waiver, dated July 10, 2006, between AMCORE Financial, Inc. and Joseph B. McGougan (Incorporated by reference to AMCOREs Form 8-K as
filed with the Commission on July 11, 2006).                                                                                                                                                                                                                                                                           
|     | 
|31.1 |  | Certification of CEO pursuant to Rule 13a-14 and Rule 15d-14 of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.                                                                                                                                                                                                                                                                                                                                       
|     | 
|31.2 |  | Certification of CFO pursuant to Rule 13a-14 and Rule 15d-14 of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.                                                                                                                                                                                                                                                                                                                                       
|     | 
|32.1 |  | Certification of CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                
|     | 
|32.2 |  | Certification of CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                



53