##### Table of Contents

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10Q



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



For the quarterly period ended March 31, 2004



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



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 an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).



x Yes ̈No



The number of shares outstanding of the registrants common stock, par value $0.22 per
share, at April 30, 2004 was 25,084,084 shares.



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##### Table of Contents

AMCORE FINANCIAL, INC.



Form 10Q Table of Contents



|              |  |                                                                                                    |  |           
|------------- |  | -------------------------------------------------------------------------------------------------- |  | ----------
|              |  |                                                                                                    |  | PageNumber
|PART I        |  |                                                                                                    |  |           
|              |  |                                                                                                   
|Item 1        |  | Financial Statements                                                                               |  | 3         
|              |  |                                                                                                   
|              |  | Consolidated Balance Sheets as of March 31, 2004 and December 31, 2003                             |  | 3         
|              |  |                                                                                                   
|              |  | Consolidated Statements of Income for the Three Months Ended March 31, 2004 and 2003               |  | 4         
|              |  |                                                                                                   
|              |  | Consolidated Statements of Stockholders Equity for the Three Months Ended March 31, 2004 and 2003 |  | 5         
|              |  |                                                                                                   
|              |  | Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2004 and 2003           |  | 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                                         |  | 44        
|              |  |                                                                                                   
|Item 4        |  | Controls and Procedures                                                                            |  | 46        
|              |  |                                                                                                   
|PART II       |  |                                                                                                    |  |           
|              |  |                                                                                                   
|Item 1        |  | Legal Proceedings                                                                                  |  | 47        
|              |  |                                                                                                   
|Item 2        |  | Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities                   |  | 47        
|              |  |                                                                                                   
|Item 6        |  | Exhibits and Reports on Form 8-K                                                                   |  | 47        
|              | 
|Signatures    |  | 49                                                                                                
|              | 
|Exhibit Index |  | 50                                                                                                



2



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##### Table of Contents

PART I. ITEM 1: Financial Statements



AMCORE
Financial, Inc. and Subsidiaries



CONSOLIDATED BALANCE SHEETS

(Unaudited)



|                                                                         |  |               |  |                  |  |                                   |           |   |                  |   |           |  
|------------------------------------------------------------------------ |  | ------------- |  | ---------------- |  | --------------------------------- | --------- | - | ---------------- | - | --------- | -
|                                                                         |  |               |  |                  |  | March 31,2004                     |           |   | December 31,2003 |  
|                                                                         |  |               |  |                  |  | ( in thousands,except share data) |          
|ASSETS                                                                   |  |               |  |                  |  |                                   |           |   |                  |   |           |  
|Cash and cash equivalents                                                |  |               |  |                  |  | $                                 | 114,294   |   |                  | $ | 107,965   |  
|Interest earning deposits in banks                                       |  |               |  |                  |  |                                   | 7,160     |   |                  |   | 1,746     |  
|Federal funds sold and other short-term investments                      |  |               |  |                  |  |                                   | 3,150     |   |                  |   |          |  
|Loans held for sale                                                      |  |               |  |                  |  |                                   | 40,369    |   |                  |   | 32,351    |  
|Securities available for sale                                            |  |               |  |                  |  |                                   | 1,161,886 |   |                  |   | 1,165,382 |  
|Gross loans                                                              |  |               |  |                  |  |                                   | 3,042,890 |   |                  |   | 2,992,309 |  
|Allowance for loan losses                                                |  |               |  |                  |  |                                   | (43,475   | ) |                  |   | (42,115   | )
|                                                                         |  |               |  |                  |  |                                   |           |   |                  |   |           |  
|Net loans                                                                |  |               |  |                  |  | $                                 | 2,999,415 |   |                  | $ | 2,950,194 |  
|Company owned life insurance                                             |  |               |  |                  |  |                                   | 120,172   |   |                  |   | 116,475   |  
|Premises and equipment, net                                              |  |               |  |                  |  |                                   | 74,998    |   |                  |   | 72,427    |  
|Goodwill                                                                 |  |               |  |                  |  |                                   | 15,575    |   |                  |   | 15,575    |  
|Foreclosed real estate, net                                              |  |               |  |                  |  |                                   | 5,223     |   |                  |   | 4,433     |  
|Other assets                                                             |  |               |  |                  |  |                                   | 76,794    |   |                  |   | 77,080    |  
|                                                                         |  |               |  |                  |  |                                   |           |   |                  |   |           |  
|TOTAL ASSETS                                                             |  |               |  |                  |  | $                                 | 4,619,036 |   |                  | $ | 4,543,628 |  
|                                                                         |  |               |  |                  |  |                                   |           |   |                  |   |           |  
|LIABILITIES                                                              |  |               |  |                  |  |                                   |           |   |                  |   |           |  
|Deposits:                                                                |  |               |  |                  |  |                                   |           |   |                  |   |           |  
|Demand deposits                                                          |  |               |  |                  |  | $                                 | 1,655,550 |   |                  | $ | 1,615,392 |  
|Savings deposits                                                         |  |               |  |                  |  |                                   | 241,784   |   |                  |   | 244,587   |  
|Other time deposits                                                      |  |               |  |                  |  |                                   | 1,558,151 |   |                  |   | 1,508,515 |  
|                                                                         |  |               |  |                  |  |                                   |           |   |                  |   |           |  
|Total deposits                                                           |  |               |  |                  |  | $                                 | 3,455,485 |   |                  | $ | 3,368,494 |  
|Short-term borrowings                                                    |  |               |  |                  |  |                                   | 524,004   |   |                  |   | 557,063   |  
|Long-term borrowings                                                     |  |               |  |                  |  |                                   | 186,907   |   |                  |   | 184,610   |  
|Other liabilities                                                        |  |               |  |                  |  |                                   | 66,490    |   |                  |   | 57,877    |  
|                                                                         |  |               |  |                  |  |                                   |           |   |                  |   |           |  
|TOTAL LIABILITIES                                                        |  |               |  |                  |  | $                                 | 4,232,886 |   |                  | $ | 4,168,044 |  
|                                                                         |  |               |  |                  |  |                                   |           |   |                  |   |           |  
|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;             |  |               |  |                  |  |                                   |           |   |                  |   |           |  
|                                                                         |  | March 31,2004 |  | December 31,2003 |  |                                   |           |   |                  |  
|Issued                                                                   |  | 29,880,890    |  | 29,830,041       |  |                                   |           |   |                  |   |           |  
|Outstanding                                                              |  | 25,168,310    |  | 25,079,471       |  |                                   | 6,638     |   |                  |   | 6,625     |  
|Additional paid-in capital                                               |  |               |  |                  |  |                                   | 74,627    |   |                  |   | 73,862    |  
|Retained earnings                                                        |  |               |  |                  |  |                                   | 384,031   |   |                  |   | 378,305   |  
|Deferred compensation                                                    |  |               |  |                  |  |                                   | (316      | ) |                  |   | (353      | )
|Treasury stock (3/31/04 - 4,712,580 shares; 12/31/03 - 4,750,570 shares) |  |               |  |                  |  |                                   | (92,324   | ) |                  |   | (91,812   | )
|Accumulated other comprehensive income                                   |  |               |  |                  |  |                                   | 13,494    |   |                  |   | 8,957     |  
|                                                                         |  |               |  |                  |  |                                   |           |   |                  |   |           |  
|TOTAL STOCKHOLDERS EQUITY                                               |  |               |  |                  |  | $                                 | 386,150   |   |                  | $ | 375,584   |  
|                                                                         |  |               |  |                  |  |                                   |           |   |                  |   |           |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                               |  |               |  |                  |  | $                                 | 4,619,036 |   |                  | $ | 4,543,628 |  
|                                                                         |  |               |  |                  |  |                                   |           |   |                  |   |           |  



See accompanying
notes to consolidated financial statements.



3



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##### Table of Contents

AMCORE Financial, Inc. and Subsidiaries



CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)



|                                                                |  |                                       |        |   |      |   |       
|--------------------------------------------------------------- |  | ------------------------------------- | ------ | - | ---- | - | ------
|                                                                |  | For the ThreeMonths EndedMarch 31,   
|                                                                |  | 2004                                  |        |   | 2003
|                                                                |  | ( in thousands, exceptper share data)
|INTEREST INCOME                                                 |  |                                       |        |   |      |   |       
|Interest and fees on loans                                      |  | $                                     | 43,003 |   |      | $ | 45,327
|Interest on securities:                                         |  |                                       |        |   |      |   |       
|Taxable                                                         |  | $                                     | 10,917 |   |      | $ | 10,711
|Tax-exempt                                                      |  |                                       | 1,702  |   |      |   | 2,520 
|                                                                |  |                                       |        |   |      |   |       
|Total Interest on Securities                                    |  | $                                     | 12,619 |   |      | $ | 13,231
|                                                                |  |                                       |        |   |      |   |       
|Interest on federal funds sold and other short-term investments |  | $                                     | 18     |   |      | $ | 15    
|Interest and fees on loans held for sale                        |  |                                       | 714    |   |      |   | 1,173 
|Interest on deposits in banks                                   |  |                                       | 1      |   |      |   | 7     
|                                                                |  |                                       |        |   |      |   |       
|Total Interest Income                                           |  | $                                     | 56,355 |   |      | $ | 59,753
|                                                                |  |                                       |        |   |      |   |       
|INTEREST EXPENSE                                                |  |                                       |        |   |      |   |       
|Interest on deposits                                            |  | $                                     | 13,944 |   |      | $ | 19,283
|Interest on short-term borrowings                               |  |                                       | 2,728  |   |      |   | 3,172 
|Interest on long-term borrowings                                |  |                                       | 2,395  |   |      |   | 2,782 
|                                                                |  |                                       |        |   |      |   |       
|Total Interest Expense                                          |  | $                                     | 19,067 |   |      | $ | 25,237
|                                                                |  |                                       |        |   |      |   |       
|Net Interest Income                                             |  | $                                     | 37,288 |   |      | $ | 34,516
|Provision for loan losses                                       |  |                                       | 4,675  |   |      |   | 12,575
|                                                                |  |                                       |        |   |      |   |       
|Net Interest Income After Provision for Loan Losses             |  | $                                     | 32,613 |   |      | $ | 21,941
|                                                                |  |                                       |        |   |      |   |       
|NON-INTEREST INCOME                                             |  |                                       |        |   |      |   |       
|Trust and asset management income                               |  | $                                     | 5,516  |   |      | $ | 5,738 
|Service charges on deposits                                     |  |                                       | 4,403  |   |      |   | 4,398 
|Mortgage banking (loss) income                                  |  |                                       | (385   | ) |      |   | 2,989 
|Company owned life insurance income                             |  |                                       | 2,169  |   |      |   | 1,783 
|Gain on sale of branches                                        |  |                                       |       |   |      |   | 8,208 
|Gain on sale of loans                                           |  |                                       | 612    |   |      |   | 2,491 
|Other                                                           |  |                                       | 3,300  |   |      |   | 2,542 
|                                                                |  |                                       |        |   |      |   |       
|Non-Interest Income, Excluding Net Security Gains               |  | $                                     | 15,615 |   |      | $ | 28,149
|Net security gains                                              |  |                                       | 1,914  |   |      |   | 273   
|                                                                |  |                                       |        |   |      |   |       
|Total Non-Interest Income                                       |  | $                                     | 17,529 |   |      | $ | 28,422
|OPERATING EXPENSES                                              |  |                                       |        |   |      |   |       
|Compensation expense                                            |  | $                                     | 17,298 |   |      | $ | 14,936
|Employee benefits                                               |  |                                       | 5,128  |   |      |   | 4,547 
|Net occupancy expense                                           |  |                                       | 2,514  |   |      |   | 2,131 
|Equipment expense                                               |  |                                       | 2,449  |   |      |   | 2,457 
|Data processing expense                                         |  |                                       | 584    |   |      |   | 1,790 
|Professional fees                                               |  |                                       | 1,242  |   |      |   | 1,062 
|Communication expense                                           |  |                                       | 1,126  |   |      |   | 1,201 
|Advertising and business development                            |  |                                       | 1,514  |   |      |   | 1,423 
|Amortization of intangible assets                               |  |                                       |       |   |      |   | 35    
|Other                                                           |  |                                       | 4,896  |   |      |   | 6,412 
|                                                                |  |                                       |        |   |      |   |       
|Total Operating Expenses                                        |  | $                                     | 36,751 |   |      | $ | 35,994
|                                                                |  |                                       |        |   |      |   |       
|Income Before Income Taxes                                      |  | $                                     | 13,391 |   |      | $ | 14,369
|Income taxes                                                    |  |                                       | 3,373  |   |      |   | 3,648 
|                                                                |  |                                       |        |   |      |   |       
|Net Income                                                      |  | $                                     | 10,018 |   |      | $ | 10,721
|                                                                |  |                                       |        |   |      |   |       
|EARNINGS PER COMMON SHARE (EPS)                                 |  |                                       |        |   |      |   |       
|Basic                                                           |  | $                                     | 0.40   |   |      | $ | 0.43  
|Diluted                                                         |  | $                                     | 0.39   |   |      | $ | 0.43  
|DIVIDENDS PER COMMON SHARE                                      |  | $                                     | 0.17   |   |      | $ | 0.16  
|AVERAGE COMMON SHARES OUTSTANDING                               |  |                                       |        |   |      |   |       
|Basic                                                           |  |                                       | 25,210 |   |      |   | 24,792
|Diluted                                                         |  |                                       | 25,500 |   |      |   | 24,936



See accompanying
notes to consolidated financial statements.



4



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##### Table of Contents

AMCORE Financial, Inc. and Subsidiaries



CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

(Unaudited)



|                                                                                     |  |                                   |       |                          |   |        |                  |  |   |                      |   |  |               |      |   |                                            |   |         |                          |  |   |        |   |  |   |         |  
|------------------------------------------------------------------------------------ |  | --------------------------------- | ----- | ------------------------ | - | ------ | ---------------- |  | - | -------------------- | - |  | ------------- | ---- | - | ------------------------------------------ | - | ------- | ------------------------ |  | - | ------ | - |  | - | ------- | -
|                                                                                     |  | CommonStock                       |       | AdditionalPaid-InCapital |   |        | RetainedEarnings |  |   | DeferredCompensation |   |  | TreasuryStock |      |   | AccumulatedOtherComprehensiveIncome (Loss) |   |         | TotalStockholdersEquity | 
|                                                                                     |  | (in thousands, except share data) |      
|Balance at December 31, 2002                                                         |  | $                                 | 6,615 |                          | $ | 74,326 |                  |  | $ | 351,247              |   |  | $             | (523 | ) |                                            | $ | (97,043 | )                        |  | $ | 21,059 |   |  | $ | 355,681 |  
|                                                                                     |  |                                   |       |                          |   |        |                  |  |   |                      |   |  |               |      |   |                                            |   |         |                          |  |   |        |   |  |   |         |  
|Comprehensive Income:                                                                |  |                                   |       |                          |   |        |                  |  |   |                      |   |  |               |      |   |                                            |   |         |                          |  |   |        |   |  |   |         |  
|Net Income                                                                           |  |                                   |      |                          |   |       |                  |  |   | 10,721               |   |  |               |     |   |                                            |   |        |                          |  |   |       |   |  |   | 10,721  |  
|Current period unrealized gains (losses) on hedging activities                       |  |                                   |      |                          |   |       |                  |  |   |                     |   |  |               |     |   |                                            |   |        |                          |  |   |       |   |  |   |        |  
|Reclassification of gains on hedging activities to earnings                          |  |                                   |      |                          |   |       |                  |  |   |                     |   |  |               |     |   |                                            |   |        |                          |  |   | (577   | ) |  |   | (577    | )
|Income tax effect related to items of other comprehensive income                     |  |                                   |      |                          |   |       |                  |  |   |                     |   |  |               |     |   |                                            |   |        |                          |  |   | 225    |   |  |   | 225     |  
|                                                                                     |  |                                   |       |                          |   |        |                  |  |   |                      |   |  |               |      |   |                                            |   |         |                          |  |   |        |   |  |   |         |  
|Net effect of hedging activities                                                     |  |                                   |      |                          |   |       |                  |  |   |                     |   |  |               |     |   |                                            |   |        |                          |  |   | (352   | ) |  |   | (352    | )
|                                                                                     |  |                                   |       |                          |   |        |                  |  |   |                      |   |  |               |      |   |                                            |   |         |                          |  |   |        |   |  |   |         |  
|Unrealized holding losses on securities available for sale arising during the period |  |                                   |      |                          |   |       |                  |  |   |                     |   |  |               |     |   |                                            |   |        |                          |  |   | (1,849 | ) |  |   | (1,849  | )
|Less reclassification adjustment for net security gains included in net income       |  |                                   |      |                          |   |       |                  |  |   |                     |   |  |               |     |   |                                            |   |        |                          |  |   | (273   | ) |  |   | (273    | )
|Income tax effect related to items of other comprehensive income                     |  |                                   |      |                          |   |       |                  |  |   |                     |   |  |               |     |   |                                            |   |        |                          |  |   | 836    |   |  |   | 836     |  
|                                                                                     |  |                                   |       |                          |   |        |                  |  |   |                      |   |  |               |      |   |                                            |   |         |                          |  |   |        |   |  |   |         |  
|Net unrealized losses on securities available for sale                               |  |                                   |      |                          |   |       |                  |  |   |                     |   |  |               |     |   |                                            |   |        |                          |  |   | (1,286 | ) |  |   | (1,286  | )
|                                                                                     |  |                                   |       |                          |   |        |                  |  |   |                      |   |  |               |      |   |                                            |   |         |                          |  |   |        |   |  |   |         |  
|Comprehensive Income (Loss)                                                          |  |                                   |      |                          |   |       |                  |  |   | 10,721               |   |  |               |     |   |                                            |   |        |                          |  |   | (1,638 | ) |  |   | 9,083   |  
|                                                                                     |  |                                   |       |                          |   |        |                  |  |   |                      |   |  |               |      |   |                                            |   |         |                          |  |   |        |   |  |   |         |  
|Cash dividends on common stock - $0.16 per share                                     |  |                                   |      |                          |   |       |                  |  |   | (3,967               | ) |  |               |     |   |                                            |   |        |                          |  |   |       |   |  |   | (3,967  | )
|Purchase of 3,730 shares for the treasury                                            |  |                                   |      |                          |   |       |                  |  |   |                     |   |  |               |     |   |                                            |   | (77     | )                        |  |   |       |   |  |   | (77     | )
|Deferred compensation expense                                                        |  |                                   |      |                          |   | 50     |                  |  |   |                     |   |  |               | 101  |   |                                            |   |        |                          |  |   |       |   |  |   | 151     |  
|Reissuance of 22,941 treasury shares for incentive plans                             |  |                                   |      |                          |   | (176   | )                |  |   |                     |   |  |               |     |   |                                            |   | 508     |                          |  |   |       |   |  |   | 332     |  
|Issuance of 9,799 common shares for Employee Stock Plan                              |  |                                   | 2     |                          |   | 179    |                  |  |   |                     |   |  |               |     |   |                                            |   |        |                          |  |   |       |   |  |   | 181     |  
|                                                                                     |  |                                   |       |                          |   |        |                  |  |   |                      |   |  |               |      |   |                                            |   |         |                          |  |   |        |   |  |   |         |  
|Balance at March 31, 2003                                                            |  | $                                 | 6,617 |                          | $ | 74,379 |                  |  | $ | 358,001              |   |  | $             | (422 | ) |                                            | $ | (96,612 | )                        |  | $ | 19,421 |   |  | $ | 361,384 |  
|                                                                                     |  |                                   |       |                          |   |        |                  |  |   |                      |   |  |               |      |   |                                            |   |         |                          |  |   |        |   |  |   |         |  
|Balance at December 31, 2003                                                         |  | $                                 | 6,625 |                          | $ | 73,862 |                  |  | $ | 378,305              |   |  | $             | (353 | ) |                                            | $ | (91,812 | )                        |  | $ | 8,957  |   |  | $ | 375,584 |  
|                                                                                     |  |                                   |       |                          |   |        |                  |  |   |                      |   |  |               |      |   |                                            |   |         |                          |  |   |        |   |  |   |         |  
|Comprehensive Income:                                                                |  |                                   |       |                          |   |        |                  |  |   |                      |   |  |               |      |   |                                            |   |         |                          |  |   |        |   |  |   |         |  
|Net Income                                                                           |  |                                   |      |                          |   |       |                  |  |   | 10,018               |   |  |               |     |   |                                            |   |        |                          |  |   |       |   |  |   | 10,018  |  
|Current period unrealized gains (losses) on hedging activities                       |  |                                   |      |                          |   |       |                  |  |   |                     |   |  |               |     |   |                                            |   |        |                          |  |   |       |   |  |   |        |  
|Reclassification of gains on hedging activities to earnings                          |  |                                   |      |                          |   |       |                  |  |   |                     |   |  |               |     |   |                                            |   |        |                          |  |   | (481   | ) |  |   | (481    | )
|Income tax effect related to items of other comprehensive income                     |  |                                   |      |                          |   |       |                  |  |   |                     |   |  |               |     |   |                                            |   |        |                          |  |   | 188    |   |  |   | 188     |  
|                                                                                     |  |                                   |       |                          |   |        |                  |  |   |                      |   |  |               |      |   |                                            |   |         |                          |  |   |        |   |  |   |         |  
|Net effect of hedging activities                                                     |  |                                   |      |                          |   |       |                  |  |   |                     |   |  |               |     |   |                                            |   |        |                          |  |   | (293   | ) |  |   | (293    | )
|                                                                                     |  |                                   |       |                          |   |        |                  |  |   |                      |   |  |               |      |   |                                            |   |         |                          |  |   |        |   |  |   |         |  
|Unrealized holding gains on securities available for sale arising during the period  |  |                                   |      |                          |   |       |                  |  |   |                     |   |  |               |     |   |                                            |   |        |                          |  |   | 8,813  |   |  |   | 8,813   |  
|Less reclassification adjustment for net security gains included in net income       |  |                                   |      |                          |   |       |                  |  |   |                     |   |  |               |     |   |                                            |   |        |                          |  |   | (1,914 | ) |  |   | (1,914  | )
|Income tax effect related to items of other comprehensive income                     |  |                                   |      |                          |   |       |                  |  |   |                     |   |  |               |     |   |                                            |   |        |                          |  |   | (2,069 | ) |  |   | (2,069  | )
|                                                                                     |  |                                   |       |                          |   |        |                  |  |   |                      |   |  |               |      |   |                                            |   |         |                          |  |   |        |   |  |   |         |  
|Net unrealized gains on securities available for sale                                |  |                                   |      |                          |   |       |                  |  |   |                     |   |  |               |     |   |                                            |   |        |                          |  |   | 4,830  |   |  |   | 4,830   |  
|                                                                                     |  |                                   |       |                          |   |        |                  |  |   |                      |   |  |               |      |   |                                            |   |         |                          |  |   |        |   |  |   |         |  
|Comprehensive Income                                                                 |  |                                   |      |                          |   |       |                  |  |   | 10,018               |   |  |               |     |   |                                            |   |        |                          |  |   | 4,537  |   |  |   | 14,555  |  
|                                                                                     |  |                                   |       |                          |   |        |                  |  |   |                      |   |  |               |      |   |                                            |   |         |                          |  |   |        |   |  |   |         |  
|Cash dividends on common stock - $0.17 per share                                     |  |                                   |      |                          |   |       |                  |  |   | (4,292               | ) |  |               |     |   |                                            |   |        |                          |  |   |       |   |  |   | (4,292  | )
|Purchase of 245,164 shares for the treasury                                          |  |                                   |      |                          |   |       |                  |  |   |                     |   |  |               |     |   |                                            |   | (7,156  | )                        |  |   |       |   |  |   | (7,156  | )
|Deferred compensation expense and other - 6,669 shares                               |  |                                   | 3     |                          |   | 93     |                  |  |   |                     |   |  |               | 37   |   |                                            |   |        |                          |  |   |       |   |  |   | 133     |  
|Reissuance of 283,154 treasury shares for incentive plans                            |  |                                   |      |                          |   | (166   | )                |  |   |                     |   |  |               |      |   |                                            |   | 6,644   |                          |  |   |       |   |  |   | 6,478   |  
|Issuance of 44,180 common shares for Employee Stock Plan                             |  |                                   | 10    |                          |   | 838    |                  |  |   |                     |   |  |               |     |   |                                            |   |        |                          |  |   |       |   |  |   | 848     |  
|                                                                                     |  |                                   |       |                          |   |        |                  |  |   |                      |   |  |               |      |   |                                            |   |         |                          |  |   |        |   |  |   |         |  
|Balance at March 31, 2004                                                            |  | $                                 | 6,638 |                          | $ | 74,627 |                  |  | $ | 384,031              |   |  | $             | (316 | ) |                                            | $ | (92,324 | )                        |  | $ | 13,494 |   |  | $ | 386,150 |  
|                                                                                     |  |                                   |       |                          |   |        |                  |  |   |                      |   |  |               |      |   |                                            |   |         |                          |  |   |        |   |  |   |         |  



See accompanying
notes to consolidated financial statements.



5



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##### Table of Contents

AMCORE Financial, Inc. and Subsidiaries



CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



|                                                                                                  |  |                             |         |   |      |   |          |  
|------------------------------------------------------------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | -------- | -
|                                                                                                  |  | Three Months EndedMarch 31, |        
|                                                                                                  |  | 2004                        |         |   | 2003 |  
|                                                                                                  |  | (in thousands)              |        
|Cash Flows From Operating Activities                                                              |  |                             |         |   |      |   |          |  
|Net income                                                                                        |  | $                           | 10,018  |   |      | $ | 10,721   |  
|Adjustments to reconcile net income from operations to net cash provided by operating activities: |  |                             |         |   |      |   |          |  
|Depreciation and amortization of premises and equipment                                           |  |                             | 1,992   |   |      |   | 1,615    |  
|Amortization and accretion of securities, net                                                     |  |                             | 973     |   |      |   | 2,278    |  
|Provision for loan losses                                                                         |  |                             | 4,675   |   |      |   | 12,575   |  
|Amortization of intangible assets                                                                 |  |                             |        |   |      |   | 35       |  
|Company owned life insurance income, net of death benefits                                        |  |                             | (1,432  | ) |      |   | (1,315   | )
|Gain on sale of branches                                                                          |  |                             |        |   |      |   | (8,208   | )
|Net securities gains                                                                              |  |                             | (1,914  | ) |      |   | (273     | )
|Net gain on sale of loans                                                                         |  |                             | (612    | ) |      |   | (2,491   | )
|Net gain on sale of loans held for sale                                                           |  |                             | (810    | ) |      |   | (4,230   | )
|Originations of loans held for sale                                                               |  |                             | (88,937 | ) |      |   | (185,653 | )
|Proceeds from sales of loans held for sale                                                        |  |                             | 83,870  |   |      |   | 205,948  |  
|Deferred income tax benefit                                                                       |  |                             | (869    | ) |      |   | (2,209   | )
|Tax benefit on exercise of stock options                                                          |  |                             | 777     |   |      |   | 88       |  
|Other, net                                                                                        |  |                             | 8,693   |   |      |   | 18,408   |  
|                                                                                                  |  |                             |         |   |      |   |          |  
|Net cash provided by operating activities                                                         |  | $                           | 16,424  |   |      | $ | 47,289   |  
|                                                                                                  |  |                             |         |   |      |   |          |  
|Cash Flows From Investing Activities                                                              |  |                             |         |   |      |   |          |  
|Proceeds from maturities of securities available for sale                                         |  | $                           | 52,206  |   |      | $ | 146,505  |  
|Proceeds from sales of securities available for sale                                              |  |                             | 47,258  |   |      |   | 51,591   |  
|Purchase of securities available for sale                                                         |  |                             | (73,111 | ) |      |   | (131,589 | )
|Net increase in federal funds sold and other short-term investments                               |  |                             | (3,150  | ) |      |   | (100     | )
|Net increase in interest earning deposits in banks                                                |  |                             | (5,414  | ) |      |   | (5,378   | )
|Net increase in loans                                                                             |  |                             | (56,349 | ) |      |   | (99,186  | )
|Proceeds from the sale of loans                                                                   |  |                             |        |   |      |   | 107,734  |  
|Investment in company owned life insurance                                                        |  |                             | (2,265  | ) |      |   | (1,063   | )
|Premises and equipment expenditures, net                                                          |  |                             | (4,562  | ) |      |   | (3,605   | )
|Proceeds from the sale of foreclosed real estate                                                  |  |                             | 1,259   |   |      |   | 1,258    |  
|                                                                                                  |  |                             |         |   |      |   |          |  
|Net cash (used for) provided by investing activities                                              |  | $                           | (44,128 | ) |      | $ | 66,167   |  
|                                                                                                  |  |                             |         |   |      |   |          |  
|Cash Flows From Financing Activities                                                              |  |                             |         |   |      |   |          |  
|Net increase in demand deposits and savings accounts                                              |  | $                           | 37,355  |   |      | $ | 66,146   |  
|Net increase in time deposits                                                                     |  |                             | 49,636  |   |      |   | 34,639   |  
|Net decrease in short-term borrowings                                                             |  |                             | (48,059 | ) |      |   | (142,953 | )
|Proceeds from long-term borrowings                                                                |  |                             |        |   |      |   | 15,000   |  
|Payment of long-term borrowings                                                                   |  |                             | (3      | ) |      |   | (15,800  | )
|Net payments to settle branch sales                                                               |  |                             |        |   |      |   | (65,439  | )
|Dividends paid                                                                                    |  |                             | (4,292  | ) |      |   | (3,967   | )
|Issuance of common shares for employee stock plan                                                 |  |                             | 851     |   |      |   | 181      |  
|Reissuance of treasury shares for incentive plans                                                 |  |                             | 5,701   |   |      |   | 420      |  
|Purchase of shares for treasury                                                                   |  |                             | (7,156  | ) |      |   | (77      | )
|                                                                                                  |  |                             |         |   |      |   |          |  
|Net cash provided by (used for) financing activities                                              |  | $                           | 34,033  |   |      | $ | (111,850 | )
|                                                                                                  |  |                             |         |   |      |   |          |  
|Net change in cash and cash equivalents                                                           |  | $                           | 6,329   |   |      | $ | 1,606    |  
|Cash and cash equivalents:                                                                        |  |                             |         |   |      |   |          |  
|Beginning of year                                                                                 |  |                             | 107,965 |   |      |   | 145,224  |  
|                                                                                                  |  |                             |         |   |      |   |          |  
|End of period                                                                                     |  | $                           | 114,294 |   |      | $ | 146,830  |  
|                                                                                                  |  |                             |         |   |      |   |          |  
|Supplemental Disclosures of Cash Flow Information                                                 |  |                             |         |   |      |   |          |  
|Cash payments for:                                                                                |  |                             |         |   |      |   |          |  
|Interest paid to depositors                                                                       |  | $                           | 15,590  |   |      | $ | 21,924   |  
|Interest paid on borrowings                                                                       |  |                             | 4,358   |   |      |   | 5,117    |  
|Income tax payments                                                                               |  |                             |        |   |      |   | 2,618    |  
|Non-Cash Investing and Financing                                                                  |  |                             |         |   |      |   |          |  
|Foreclosed real estate - acquired in settlement of loans                                          |  |                             | 2,032   |   |      |   | 1,187    |  
|Transfer current portion of long-term borrowings to short-term borrowings                         |  |                             | 15,000  |   |      |   | 18       |  
|Capitalized interest                                                                              |  |                             | 42      |   |      |   | 151      |  
|De-consolidation of AMCORE Capital Trust I - increases in assets and liabilities                  |  |                             | 16,238  |   |      |   |         |  



Balance changes resulting from branch
sales are excluded from individual line items such as deposits, loans, and fixed assets.



See accompanying notes to consolidated financial statements.



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##### Table of Contents

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 accounting principles generally accepted in the United States of America for interim financial reporting and with instructions for Form 10Q and Rule 1001 of Regulation SX. 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.



Operating results
for the three month period ended March 31, 2004 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2004. For further information, refer to the consolidated financial statements and footnotes
thereto included in the Form 10K Annual Report of AMCORE Financial, Inc. and Subsidiaries (the Company) for the year ended December 31, 2003. In particular, for presentation purposes and greater comparability with industry
practices, certain loan origination costs have been reclassified and netted against mortgage banking income in the Consolidated Statements of Income. These reclassifications resulted in an equal decrease to compensation expense and employee
benefits. The reclassifications had no effect on Stockholders Equity or net income as previously reported.



New Accounting Standards



In January 2003, the FASB issued FIN 46, Consolidation of Variable Interest Entities, which was subsequently replaced by a revised FIN 46 in December 2003.
FIN 46 is an interpretation of Accounting Research Bulletin No. 51, Consolidated Financial Statements, and applies to certain variable interest entities (VIEs) in which equity investors do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The Company adopted FIN 46 for the reporting period ending March
31, 2004. Upon adoption of FIN 46, the Company was required to de-consolidate its investment in AMCORE Capital Trust I (Trust) a statutory business trust. As a result of the de-consolidation, the March 31, 2004 balance reflects $41.2
million of long-term debt on its Consolidated Balance Sheets which includes the previously reported $25.0 million of outstanding preferred securities, $15.0 million of preferred securities held by another subsidiary of the Company and previously
eliminated in consolidation, plus $1.2 million of common securities held by the Company, which were also previously eliminated in consolidation. See Note 7 of the Notes to the Consolidated Financial Statements.



In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments
with Characteristics of Both Liabilities and Equity (SFAS No. 150). SFAS No. 150 establishes standards regarding the manner in which an issuer classifies and measures certain types of financial instruments having characteristics of both
liabilities and equity. Pursuant to SFAS No. 150, such freestanding financial instruments (i.e., those entered into separately from an entitys other financial instruments or equity transactions or that are legally detachable and separately
exercisable) must be classified as liabilities or, in some cases, assets. In addition, SFAS No. 150 requires that financial instruments containing obligations to repurchase the issuing entitys equity shares and, under certain circumstances,
obligations that are settled by delivery of the issuers shares be classified as liabilities. SFAS No. 150 amends SFAS No. 128, Earnings Per Share, and SFAS No. 133, and nullifies (or partially nullifies) various Emerging Issues
Task Force (EITF) consensuses. SFAS No. 150 was effective for financial instruments entered into or modified after May 31, 2003 and for contracts in existence at the start of the first interim period beginning after June 15, 2003. On
November 7, 2003, the FASB issued Staff Position (FSP) No. 150-3 which deferred the application of several provisions of SFAS No. 150. The adoption of SFAS No. 150 and FSP No. 150-3 did not, and are not expected to, have a material
effect on the Companys Consolidated Financial Statements.



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##### Table of Contents

In November 2003, the FASB ratified a consensus reached by the Emerging Issues Task Force in EITF 03-1, The Meaning
of Other-Than-Temporary Impairment and Its Application to Certain Investments, which is effective for fiscal years ending after December 15, 2003. The consensus requires certain quantitative and qualitative disclosures for debt and marketable
equity securities classified as available-for-sale or held-to-maturity under SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities that are impaired at the balance sheet date but for which an other-than-temporary
impairment has not been recognized. These disclosures are contained in Note 2 of the Notes to Consolidated Financial Statements.



In March 2004, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulleting No. 105, Application of Accounting Principles to Loan
Commitments,  (SAB No. 105). SAB No. 105 applies to all registrants that issue loan commitments that relate to the origination of mortgage loans that will be held for sale and applies specifically to loan commitments that are issued after
March 31, 2004. The adoption of SAB No. 105 is not expected to have a material effect on the Companys Consolidated Financial Statements.



Completed Divestitures



During the first quarter of 2003, AMCORE Bank, N.A. (the BANK) sold six Wisconsin branches in Clinton, Darien, Montello, Kingston, Dalton and Westfield, resulting in $8.2 million pre-tax or $4.9 million in
after-tax gains, net of associated costs. For the six branches sold, $47.8 million in loans, $124.6 million in deposits and $2.1 million in premises and equipment were transferred to the respective buyers. The net cash paid by the Company to settle
the divestitures was $65.4 million.



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##### Table of Contents

NOTE 2 - SECURITIES



A summary of securities at March 31, 2004 and December 31, 2003 were as follows:



|                                    |  |                |           |                      |   |                       |  |   |            |   |  |   |          
|----------------------------------- |  | -------------- | --------- | -------------------- | - | --------------------- |  | - | ---------- | - |  | - | ---------
|                                    |  | AmortizedCost  |           | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | Fair Value
|                                    |  | (in thousands)
|At March 31, 2004                   |  |                |           |                      |   |                       |  |   |            |   |  |   |          
|Securities Available for Sale:      |  |                |           |                      |   |                       |  |   |            |   |  |   |          
|U.S. Treasury                       |  | $              | 5,000     |                      | $ | 26                    |  | $ |           |   |  | $ | 5,026    
|U.S. Government agencies            |  |                | 83,063    |                      |   | 1,279                 |  |   | (2         | ) |  |   | 84,340   
|Agency mortgage-backed securities   |  |                | 819,113   |                      |   | 9,564                 |  |   | (1,928     | ) |  |   | 826,749  
|State and political subdivisions    |  |                | 141,918   |                      |   | 9,662                 |  |   | (6         | ) |  |   | 151,574  
|Corporate obligations and other     |  |                | 92,384    |                      |   | 1,963                 |  |   | (150       | ) |  |   | 94,197   
|                                    |  |                |           |                      |   |                       |  |   |            |   |  |   |          
|Total Securities Available for Sale |  | $              | 1,141,478 |                      | $ | 22,494                |  | $ | (2,086     | ) |  | $ | 1,161,886
|                                    |  |                |           |                      |   |                       |  |   |            |   |  |   |          
|At December 31, 2003                |  |                |           |                      |   |                       |  |   |            |   |  |   |          
|Securities Available for Sale:      |  |                |           |                      |   |                       |  |   |            |   |  |   |          
|U.S. Treasury                       |  | $              | 5,000     |                      | $ | 27                    |  | $ |           |   |  | $ | 5,027    
|U.S. Government agencies            |  |                | 78,582    |                      |   | 532                   |  |   | (1         | ) |  |   | 79,113   
|Agency mortgage-backed securities   |  |                | 835,986   |                      |   | 9,400                 |  |   | (5,169     | ) |  |   | 840,217  
|State and political subdivisions    |  |                | 144,580   |                      |   | 8,855                 |  |   |           |   |  |   | 153,435  
|Corporate obligations and other     |  |                | 87,725    |                      |   | 854                   |  |   | (989       | ) |  |   | 87,590   
|                                    |  |                |           |                      |   |                       |  |   |            |   |  |   |          
|Total Securities Available for Sale |  | $              | 1,151,873 |                      | $ | 19,668                |  | $ | (6,159     | ) |  | $ | 1,165,382
|                                    |  |                |           |                      |   |                       |  |   |            |   |  |   |          



Realized gross gains resulting from
the sale of securities available for sale were $1.9 million and $631,000 for the three months ended March 31, 2004 and 2003, respectively. Realized gross losses were $20,000 and $358,000 for the three months ended March 31, 2004 and 2003,
respectively. At March 31, 2004 and 2003, securities with a fair value of $825.0 million and $807.1 million, respectively, were pledged to secure public deposits, securities under agreements to repurchase and for other purposes required by law.



Summary of unrealized loss information for investment securities, categorized
by security type, at March 31, 2004 was as follows:



|                                    |  |                     |         |                  |                     |        |           |       |                     |        |  |            |      |                  |  |   |         |  |   |        |  
|----------------------------------- |  | ------------------- | ------- | ---------------- | ------------------- | ------ | --------- | ----- | ------------------- | ------ |  | ---------- | ---- | ---------------- |  | - | ------- |  | - | ------ | -
|                                    |  | Less Than 12 Months |         |                  | 12 Months or Longer |        |           | Total |                    
|                                    |  | Fair Value          |         | UnrealizedLosses |                     |        | FairValue |       | UnrealizedLosses(1) |        |  | Fair Value |      | UnrealizedLosses | 
|Description of Securities           |  |                     |         |                  |                     |        |           |       |                     |        |  |            |      |                  |  |   |         |  |   |        |  
|Securities Available for Sale:      |  |                     |         |                  |                     |        |           |       |                     |        |  |            |      |                  |  |   |         |  |   |        |  
|U.S. Treasury                       |  | $                   |        |                  | $                   |       |           |       | $                   |       |  | $          |     |                  |  | $ |        |  | $ |       |  
|U.S. Government agencies            |  |                     |        |                  |                     |       |           |       |                     | 246    |  |            | (2   | )                |  |   | 246     |  |   | (2     | )
|Agency mortgage-backed securities   |  |                     | 221,490 |                  |                     | (1,911 | )         |       |                     | 5,922  |  |            | (17  | )                |  |   | 227,412 |  |   | (1,928 | )
|State and political subdivisions    |  |                     | 1,592   |                  |                     | (6     | )         |       |                     |       |  |            |     |                  |  |   | 1,592   |  |   | (6     | )
|Corporate obligations and other     |  |                     | 2,661   |                  |                     | (19    | )         |       |                     | 10,799 |  |            | (131 | )                |  |   | 13,460  |  |   | (150   | )
|                                    |  |                     |         |                  |                     |        |           |       |                     |        |  |            |      |                  |  |   |         |  |   |        |  
|Total Securities Available for Sale |  | $                   | 225,743 |                  | $                   | (1,936 | )         |       | $                   | 16,967 |  | $          | (150 | )                |  | $ | 242,710 |  | $ | (2,086 | )
|                                    |  |                     |         |                  |                     |        |           |       |                     |        |  |            |      |                  |  |   |         |  |   |        |  



|(1) | Of the $150,000 total unrealized losses twelve months or longer, $129,000 related to a single asset-backed bond collateralized by fixed rate manufactured housing
contracts and installment loan agreements. At March 31, 2004, the S&P quality rating for this bond was an BBB and the security was sufficiently collateralized such that credit loss is considered remote. The security has an average
life of seven years and the Company has the ability to hold the security until all principal paydowns have been received. In the event of prepayment, it is expected that the Company would recover substantially all of its recorded investment.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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NOTE 3 - LOANS AND ALLOWANCE FOR LOAN LOSSES



The composition of the loan portfolio at March 31, 2004 and December 31, 2003 was as follows:



|                                       |  |                |           |   |                  |   |           |  
|-------------------------------------- |  | -------------- | --------- | - | ---------------- | - | --------- | -
|                                       |  | March 31,2004  |           |   | December 31,2003 |  
|                                       |  | (in thousands) |          
|Commercial, financial and agricultural |  | $              | 755,740   |   |                  | $ | 733,167   |  
|Real estate-commercial                 |  |                | 1,180,382 |   |                  |   | 1,147,592 |  
|Real estate-residential                |  |                | 367,568   |   |                  |   | 362,254   |  
|Real estate-construction               |  |                | 193,749   |   |                  |   | 194,495   |  
|Installment and consumer               |  |                | 545,240   |   |                  |   | 554,514   |  
|Direct lease financing                 |  |                | 211       |   |                  |   | 287       |  
|                                       |  |                |           |   |                  |   |           |  
|Gross loans                            |  | $              | 3,042,890 |   |                  | $ | 2,992,309 |  
|Allowance for loan losses              |  |                | (43,475   | ) |                  |   | (42,115   | )
|                                       |  |                |           |   |                  |   |           |  
|Net Loans                              |  | $              | 2,999,415 |   |                  | $ | 2,950,194 |  
|                                       |  |                |           |   |                  |   |           |  



An analysis of the allowance for loan
losses for the periods ended March 31, 2004 and March 31, 2003 is presented below:



|                                           |  |                |        |   |               |   |        |  
|------------------------------------------ |  | -------------- | ------ | - | ------------- | - | ------ | -
|                                           |  | March 31,2004  |        |   | March 31,2003 |  
|                                           |  | (in thousands) |       
|Balance at beginning of period             |  | $              | 42,115 |   |               | $ | 35,214 |  
|Provision charged to expense               |  |                | 4,675  |   |               |   | 12,575 |  
|Loans charged off                          |  |                | (4,862 | ) |               |   | (7,327 | )
|Recoveries on loans previously charged off |  |                | 1,547  |   |               |   | 545    |  
|Reductions due to sale of loans            |  |                |       |   |               |   | (1,407 | )
|                                           |  |                |        |   |               |   |        |  
|Balance at end of period                   |  | $              | 43,475 |   |               | $ | 39,600 |  
|                                           |  |                |        |   |               |   |        |  



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##### Table of Contents

NOTE 4  GOODWILL AND OTHER INTANGIBLE ASSETS



The Companys intangible asset values by segment at March 31, 2004 are as follows:



|                                    |  |   |       
|----------------------------------- |  | - | ------
|Unamortized Intangible Assets       |  |   |       
|Goodwill  Retail Banking           |  | $ | 3,572 
|- Commercial Banking                |  |   | 2,381 
|- Trust and Asset Management        |  |   | 9,622 
|                                    |  |   |       
|Total Unamortized Intangible Assets |  | $ | 15,575
|                                    |  |   |       
|Total Intangibles (net)             |  | $ | 15,575
|                                    |  |   |       



The core deposit intangibles were
fully amortized as of December 31, 2003. There were no changes in the carrying amount of goodwill for the three months ended March 31, 2004. Changes in the carrying amount of goodwill for the three months ended March 31, 2003 were related to the
sale of six bank branches in the first quarter of 2003. The changes in the carrying amount of goodwill for the three months ended March 31, 2003 are as follows:



|                                  |  |                |       |                   |   |                          |  |       |       |  |   |       
|--------------------------------- |  | -------------- | ----- | ----------------- | - | ------------------------ |  | ----- | ----- |  | - | ------
|                                  |  | RetailBanking  |       | CommercialBanking |   | Trust andAssetManagement |  | Total
|                                  |  | (in thousands)
|Balance as of January 1, 2003     |  | $              | 3,614 |                   | $ | 2,409                    |  | $     | 9,622 |  | $ | 15,645
|Goodwill related to branches sold |  |                | 42    |                   |   | 28                       |  |       |      |  |   | 70    
|                                  |  |                |       |                   |   |                          |  |       |       |  |   |       
|Balance as of March 31, 2003      |  | $              | 3,572 |                   | $ | 2,381                    |  | $     | 9,622 |  | $ | 15,575
|                                  |  |                |       |                   |   |                          |  |       |       |  |   |       



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. The March 31, 2004 balances are in the table below. At December 31, 2003, the net carrying
amount of OMSR was $11.2 million and there was no OMSR Valuation Allowance.



|                                        |  |                      |        |                          |   |                    |  |   |        |  
|--------------------------------------- |  | -------------------- | ------ | ------------------------ | - | ------------------ |  | - | ------ | -
|                                        |  | Gross CarryingAmount |        | Accumulated Amortization |   | Net CarryingAmount | 
|                                        |  | (in thousands)       |       
|Capitalized OMSR                        |  | $                    | 32,394 |                          | $ | 21,000             |  | $ | 11,394 |  
|Less: OMSR Valuation Allowance          |  |                      |        |                          |   |                    |  |   | (1,739 | )
|                                        |  |                      |        |                          |   |                    |  |   |        |  
|Net OMSR                                |  |                      |        |                          |   |                    |  | $ | 9,655  |  
|                                        |  |                      |        |                          |   |                    |  |   |        |  
|OMSR Valuation Allowance                |  |                      |        |                          |   |                    |  |   |        |  
|Balance at beginning of year            |  |                      |        |                          |   |                    |  | $ |       |  
|Impairment valuation charged to expense |  |                      |        |                          |   |                    |  |   | 1,739  |  
|                                        |  |                      |        |                          |   |                    |  |   |        |  
|Balance at March 31, 2004               |  |                      |        |                          |   |                    |  | $ | 1,739  |  
|                                        |  |                      |        |                          |   |                    |  |   |        |  



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



|                                                         |  |                 |       
|-------------------------------------------------------- |  | --------------- | ------
|                                                         |  | MortgageBanking
|                                                         |  | (in thousands) 
|Aggregate Amortization Expense For Quarter Ended 3/31/04 |  | $               | 725   
|Estimated Amortization Expense                           |  |                 |       
|For Remainder of Year Ending 12/31/04                    |  | $               | 2,564 
|For Year Ending 12/31/05                                 |  |                 | 2,207 
|For Year Ending 12/31/06                                 |  |                 | 1,656 
|For Year Ending 12/31/07                                 |  |                 | 993   
|For Year Ending 12/31/08                                 |  |                 | 795   
|For Year Ending 12/31/09                                 |  |                 | 636   
|Thereafter                                               |  |                 | 2,543 
|                                                         |  |                 |       
|Total                                                    |  | $               | 11,394
|                                                         |  |                 |       



The weighted-average amortization
period for OMSR retained during the first quarter of 2004 was 10.8 years. The unpaid principal balance of mortgage loans serviced for others, including mortgage loans held for sale, was $1.2 billion as of March 31, 2004 and December 31, 2003 and was
$1.1 billion as of March 31, 2003.



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NOTE 5 - SALE OF RECEIVABLES



There were no sales of indirect automobile loans during the first quarter 2004. During the first quarter 2003, the Company sold $106.0
million of indirect automobile loans, reporting a pre-tax gain of $2.5 million ($1.5 million after-tax). Upon sale, the net carrying amount of the loans is removed from the consolidated balance sheet in exchange for cash and certain retained
interests. The retained interests included 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"). These retained interests were allocated a carrying value of $9.2 million at the time of sale.



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 investors and the
securitization trust have no other recourse to the Company's other assets for failure of debtors to pay when due. 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.



Key economic assumptions used in measuring the retained interests at the date of the securitization and as of March 31, 2004 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 March 31, 2004 |  
|                                             |  | Loans SoldDuring 2003 |       |   | Actual               |   |       | 10% AdverseChange |  |   | 20% AdverseChange |  
|                                             |  | (in thousands)        |      
|Prepayment speed assumptions                 |  |                       |       |   |                      |   |       |                   |  |   |                   |   |  |   |       |  
|Prepayment speed                             |  |                       | 1.7   | % |                      |   | 2.0   | %                 |  |   | 2.2               | % |  |   | 2.4   | %
|Weighted average life (in months)            |  |                       | 19.5  |   |                      |   | 14.9  |                   |  |   | 14.4              |   |  |   | 13.9  |  
|Fair value of retained interests             |  | $                     | 9,418 |   |                      | $ | 7,300 |                   |  | $ | 7,225             |   |  | $ | 7,153 |  
|Change in fair value                         |  | $                     |      |   |                      | $ |      |                   |  | $ | (75               | ) |  | $ | (147  | )
|Expected credit loss assumptions             |  |                       |       |   |                      |   |       |                   |  |   |                   |   |  |   |       |  
|Expected credit losses (loss to liquidation) |  |                       | 1.9   | % |                      |   | 2.0   | %                 |  |   | 2.2               | % |  |   | 2.4   | %
|Fair value of retained interests             |  | $                     | 9,418 |   |                      | $ | 7,300 |                   |  | $ | 7,142             |   |  | $ | 6,985 |  
|Change in fair value                         |  | $                     |      |   |                      | $ |      |                   |  | $ | (158              | ) |  | $ | (315  | )
|Residual cash flow discount rate assumptions |  |                       |       |   |                      |   |       |                   |  |   |                   |   |  |   |       |  
|Residual cash flow discount rate (annual)    |  |                       | 20    | % |                      |   | 17.0  | %                 |  |   | 18.7              | % |  |   | 20.4  | %
|Fair value of retained interests             |  | $                     | 9,418 |   |                      | $ | 7,300 |                   |  | $ | 7,162             |   |  | $ | 7,028 |  
|Change in fair value                         |  | $                     |      |   |                      | $ |      |                   |  | $ | (138              | ) |  | $ | (272  | )



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.



Total cash flows attributable to the indirect automobile loan securitization transactions was an inflow of $7.1 million and $98.7 million for the first quarters of 2004
and 2003, respectively. The following table summarizes the various cash flows received from and paid to the securitization trust:



|                                                     |  |                              |        |                         |   |                 |  |           |       |  |   |  
|---------------------------------------------------- |  | ---------------------------- | ------ | ----------------------- | - | --------------- |  | --------- | ----- |  | - | -
|                                                     |  | Proceeds FromSecuritizations |        | Servicing FeesCollected |   | OtherCash Flows |  | Fees Paid
|                                                     |  | (in thousands)              
|Cash flows received from trust in first quarter 2004 |  | $                            |       |                         | $ | 139             |  | $         | 6,933 |  | $ | 
|Cash flows received from trust in first quarter 2003 |  | $                            | 98,483 |                         | $ | 78              |  | $         | 125   |  | $ | 



Other retained interests represents
net cash flows received from retained interests by the transferor other than servicing fees. 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.



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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 Amountof Loans |         | Principal Amount ofDelinquent Loans |   | Net Credit Losses Year-to-Date
|                  |  | As of March 31                 |        
|                  |  | 2004                           |         | 2003                                |   | 2004                           |  | 2003 |       | 2004 |   | 2003 
|                  |  | (in thousands)                
|Held in portfolio |  | $                              | 460,763 |                                     | $ | 430,276                        |  | $    | 5,509 |      | $ | 4,210 |  | $ | 1,112 |  | $ | 1,110
|Securitized       |  |                                | 79,873  |                                     |   | 137,790                        |  |      | 1,160 |      |   | 1,207 |  |   | 426   |  |   | 257  
|                  |  |                                |         |                                     |   |                                |  |      |       |      |   |       |  |   |       |  |   |      
|Total             |  | $                              | 540,636 |                                     | $ | 568,066                        |  | $    | 6,669 |      | $ | 5,417 |  | $ | 1,538 |  | $ | 1,367
|                  |  |                                |         |                                     |   |                                |  |      |       |      |   |       |  |   |       |  |   |      



Actual and projected static pool
credit losses, as a percentage of indirect automobile loans securitized are 1.51%, 1.77% and 2.12% as of the quarters ended March 31, 2004, 2005, and 2006, 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 at March 31, 2004 and December 31, 2003 consisted of the following:



|                                               |  |                |         |                  |   |        
|---------------------------------------------- |  | -------------- | ------- | ---------------- | - | -------
|                                               |  | March 31,2004  |         | December 31,2003
|                                               |  | (in thousands)
|Securities sold under agreements to repurchase |  | $              | 426,487 |                  | $ | 435,029
|Federal Home Loan Bank borrowings              |  |                | 40,027  |                  |   | 25,042 
|Federal funds purchased                        |  |                | 45,005  |                  |   | 74,950 
|U.S. Treasury tax and loan note accounts       |  |                | 6,435   |                  |   | 10,042 
|Commercial paper borrowings                    |  |                | 6,050   |                  |   | 12,000 
|                                               |  |                |         |                  |   |        
|Total short-term borrowings                    |  | $              | 524,004 |                  | $ | 557,063
|                                               |  |                |         |                  |   |        



NOTE 7 - LONG-TERM BORROWINGS



Long-term borrowings at March 31, 2004 and December 31, 2003 consisted of
the following:



|                                       |  |                |         |                  |   |        
|-------------------------------------- |  | -------------- | ------- | ---------------- | - | -------
|                                       |  | March 31,2004  |         | December 31,2003
|                                       |  | (in thousands)
|Federal Home Loan Bank borrowings      |  | $              | 144,605 |                  | $ | 158,545
|AMCORE Capital Trust I borrowings      |  |                | 41,238  |                  |   |       
|Capital Trust preferred securities     |  |                |        |                  |   | 25,000 
|Capitalized Lease Obligation and other |  |                | 1,064   |                  |   | 1,064  
|                                       |  |                |         |                  |   |        
|Total Long-Term Borrowings             |  | $              | 186,907 |                  | $ | 184,610
|                                       |  |                |         |                  |   |        



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 1-to-4 family real estate loans. Certain FHLB borrowings have prepayment penalties and call
features associated with them. The average maturity of these borrowings at March 31, 2004 is 4.0 years, with a weighted average borrowing rate of 4.40%. The Company reclassifies FHLB borrowings to short term borrowings when the remaining maturity
becomes less than one year. FHLB borrowings with call features, assuming they are called at the earliest call date, total $77.0 million in 2004.



Upon adoption of FIN 46, the Company was required to de-consolidate its investment in AMCORE Capital Trust I (Trust) a statutory business trust. As a result
of the de-consolidation, the March 31, 2004 balance reflects $41.2 million of long-term debt on its Consolidated Balance Sheets which included the previously reported $25.0 million of outstanding preferred securities, $15.0 million of preferred
securities held by another subsidiary of the Company and previously eliminated in consolidation, plus $1.2 million of common securities held by the Company, which were also previously eliminated in consolidation.



The capital securities pay cumulative cash distributions semiannually at an annual rate of
9.35%. The securities are redeemable from March 25, 2007 until March 25, 2017 at a declining rate of 104.675% to 100% of the principal amount. After March 25, 2017, they are redeemable at par until June 15, 2027 when redemption is mandatory. Prior
redemption is permitted under certain circumstances such as changes in tax or regulatory capital rules. The proceeds of the capital securities were invested by the Trust in junior subordinated debentures which represents all of the assets of the
Trust. The Company fully and unconditionally guarantees the capital securities through the combined operation of the debentures and other related documents. The Companys obligations under the guarantee are unsecured and subordinate to senior
and subordinated indebtedness of the Company. The $41.2 million of AMCORE Capital Trust I borrowings bear interest at a rate of 9.35% with put features that mirror the capital security call features.



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Other long-term borrowings includes a capital lease with a net carrying amount of $1.1 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-cancelable term of the original lease, which expires or renews in 2021.



Scheduled reductions of long-term borrowings are as follows:



|           |  |                |        
|---------- |  | -------------- | -------
|           |  | Total         
|           |  | (in thousands)
|2005       |  | $              | 20,186 
|2006       |  |                | 16,721 
|2007       |  |                | 28     
|2008       |  |                | 80,717 
|2009       |  |                | 36     
|Thereafter |  |                | 69,219 
|           |  |                |        
|Total      |  | $              | 186,907
|           |  |                |        



NOTE 8  DERIVATIVE
INSTRUMENTS AND HEDGE ACCOUNTING



The Company uses certain financial
instruments called derivatives to help manage (Hedge) its risk or exposure to changes in interest rates and in conjunction with its mortgage banking operations. The derivatives used most often are interest rate swaps, caps, collars and
floors (collectively, Interest Rate Derivatives), mortgage loan commitments and forward contracts. 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 from the Counter-party. It is used only as a reference point to calculate the exchange of interest payment streams.



Interest rate swaps are used by the Company to convert assets and liabilities with
variable-rate cash flows to assets and liabilities with fixed-rate cash flows (the Hedged Items). Under this arrangement, the Company receives payments from or makes payments to the Counter-party at a specified floating-rate index that
is applied to the Notional Principal Amount. This periodic receipt or payment essentially offsets floating-rate interest payments that the Company makes to its depositors or lenders or receives from its loan customers. In exchange for the receipts
from or payments to the Counter-party, the Company makes payments to or receives a payment from the Counter-party at a specified fixed-rate that is applied to the Notional Principal Amount. Thus, what was a floating rate obligation or a floating
rate asset before entering into the derivative arrangement is transformed into a fixed rate obligation or asset. These types of Hedges are considered cash flow Hedges. The Company also uses interest rate swaps to convert fixed-rate liabilities to
floating-rate liabilities. This is typically done when a fixed rate liability has been incurred to fund a variable-rate loan or investment. The interest rate swap has the effect of matching the interest rate risk on the funding with the interest
rate risk on the loans or investment. This type of Hedge is considered a fair value Hedge. The longest-term derivative that the Company has used to Hedge its interest rate exposure (cash flow Hedge) expires in September 2004, while the longest-term
fair value Hedge expires in December 2019.



Interest rate caps and collars are
derivative instruments that are variations of an interest rate swap. They also involve an exchange of interest payment streams with a Counter-party based upon a Notional Principal Amount. In the case of an interest rate cap, the exchange of income
streams does not take effect unless the specified floating-rate index rises above a pre-determined level. In an interest rate cap, the Company retains the risk of rising interest rates up to the pre-determined level, while benefiting from declines
in interest rates. In the case of an interest rate collar, the exchange of income streams does not take effect unless the specified floating-rate index rises above or falls below pre-determined levels. In an interest rate collar, the Company retains
the risk and benefits of changes in interest rates within the pre-determined levels. The net amount payable or receivable from each Interest Rate Derivative contract is recorded as an adjustment to interest income or interest expense.



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##### Table of Contents

All derivatives are recognized at fair value in the Consolidated Balance Sheets. Changes in fair value for derivatives
that are not Hedges as defined by generally accepted accounting principles are recognized in the Consolidated Statement of Income (Income Statement) as they arise. If the derivative is a Hedge, depending on the nature of the Hedge,
changes in the fair value of the derivative are either offset in the Income Statement or recorded as a component of other comprehensive income (OCI) in the Consolidated Statement of Stockholders Equity. If the derivative is
designated as a fair value Hedge, the changes in the fair value of the derivative and of the Hedged Item attributable to the Hedged risk are recognized in the Income Statement. To the extent that fair value Hedges are highly effective, changes in
the fair value of the derivatives will largely be offset by changes in the fair values of the Hedged Items. If the derivative is designated as a cash flow Hedge, changes in the fair value of the derivative due to the passage of time (Time
Value) are excluded from the assessment of Hedge effectiveness and therefore flow through the Income Statement for each period. The effective portion of the remaining changes in the fair value of the derivative (Intrinsic Value)
are recorded in OCI and are subsequently recognized in the Income Statement when the Hedged Item affects earnings. Ineffective portions of changes in the fair value of cash flow Hedges are recognized in the Income Statement. Hedge ineffectiveness is
caused when the change in expected future cash flows or fair value of a Hedged Item does not exactly offset the change in the future expected cash flows or fair value of the derivative instrument, and is generally due to differences in the interest
rate indices or interest rate reset dates. All derivatives, with the exception of $162,000 in notional value of swaps left unhedged due to the call of the Hedged Item, qualify and have been designated as Hedges.



Also considered derivatives are 1-to-4 family residential mortgage loan commitments (the
Commitments) and forward mortgage loan sales (the Forward Contracts) to the secondary market (collectively Mortgage Loan Derivatives) which are reported at fair value on the balance sheet. Changes in the fair
value of the Mortgage Loan Derivatives are included in other income or expense as they occur. However, since the Companys Forward Contracts qualify and have been designated as fair value Hedges of its portfolio of loans held for sale (the
Warehouse Loans) as well as a Hedge of its Commitments, the Warehouse Loans are also adjusted to fair value. The change in fair value of Warehouse Loans is recorded in other income or expense as it occurs. To the extent that the
Companys Forward Contracts are highly effective, the changes in the fair value of the Forward Contracts will largely offset changes in the fair value of the Commitments and Warehouse Loans.



The method that the Company uses to assess whether or not a Hedge is expected to be highly
effective in achieving offsetting changes in cash flows or fair values of the risk that is being hedged (Prospective Considerations) and the method that it uses to determine that the Hedge has been highly effective in achieving those offsets
(Retrospective Evaluations) are defined and documented at the inception of each Hedge. Hedges that are similar in nature are assessed in a similar manner.



Many of the Companys Hedges employ shortcut accounting because the critical terms of the derivative and the Hedged Item are the same. As a result,
complete offsets in cash flows or fair values are expected and no ineffectiveness is recognized in earnings. These Hedges are monitored on a quarterly basis to verify that there have been no changes in the derivative or the Hedged Item that would
invalidate this conclusion.



Those Hedges that do not qualify for
shortcut accounting use statistical analysis for the Prospective Consideration of expected Hedge effectiveness and calculations of actual dollar offsets for the Retrospective Evaluation of Hedge effectiveness. In those instances where
exact offset is not achieved, the difference (ineffectiveness) is recognized in earnings for the period. These assessments are performed quarterly using the defined and documented methodology consistently throughout the period of the respective
Hedge.



The Income Statement for the three months ended March 31, 2004 included
the following derivative related activity in other non-interest income: no income or loss due to the change in the Time Value component of the market value of cash flow Hedges, $2,000 income on the change in value of derivatives that do not qualify
for hedge accounting, $24,000 income related to the ineffective portion of the fair value Hedges, and $188,000 income related to Mortgage Loan Derivatives (net of the corresponding mark-to-



17



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##### Table of Contents

market adjustment on Hedged Warehouse Loans). These items, net of taxes of $84,000, totaled $130,000 in income recorded for the quarter ended March 31, 2004.
During the quarter, the Company terminated two fair value hedges of FHLB borrowings with a combined notional amount of $74.0 million, which resulted in a gain of $690,000. The gain continued to be classified in long term debt and amortized over the
original term of the swap.



The Income Statement for the three months ended
March 31, 2003 included the following derivative related activity in other non-interest income: $2,000 loss due to the decrease in the Time Value component of the market value of cash flow Hedges, no income or loss related to the ineffective portion
of the cash flow Hedges and an $80,000 loss related to Mortgage Loan Derivatives (net of the corresponding mark-to-market adjustment on Hedged Warehouse Loans held for sale). These items, net of taxes of $32,000, totaled a $50,000 loss recorded for
the quarter ended March 31, 2003.



Reclassification from OCI to the Income
Statement occurs each period as continuing cash flow payments bring the Intrinsic Value component of the market value of each cash flow Hedge closer to zero. During 2002, swaps that were Hedging loan cash flows were sold, for which the Company
received $3.3 million plus accrued interest. The gain continued to be classified in OCI and amortized over the original term of the swap. For the quarter ended March 31, 2004, $481,000 of this pre-tax gain was amortized (reclassified) from OCI into
income. During the three months ended March 31, 2003, $577,000 of this pre-tax gain was amortized (reclassified) from OCI into income. The remaining pre-tax gain of $489,000 included in OCI at March 31, 2004 is expected to be reclassified into
income during the next twelve months.



NOTE 9  STOCK INCENTIVE PLANS



At March 31, 2004, the Company had various stock-based compensation plans
that are described more fully in Note 13 included in the Form 10K Annual Report of the Company for the year ended December 31, 2003. The Company accounts for these plans under the recognition and measurement principles of the Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations. No stock-based compensation cost for option grants under these plans is reflected in net income, as all options granted under these
plans had an exercise price equal to the market value of the underlying common stock on the date of grant.



The Companys Stock Option Advantage Plan, an employee stock purchase plan (ESPP) within the meaning of Section 423 of the Internal Revenue Code of 1986, allows participating employees to purchase the
Corporations common stock at an exercise price of 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. No charge to earnings is recorded with
respect to the ESPP. Accordingly, the Pro Forma table below includes fair value compensation expense in the amount of the 15% discount between the stock price and the option exercise price.



The following table illustrates the effect on net income and earnings per share if the
Company had applied the fair value recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation, to all stock-based compensation. The fair values were calculated using a Black-Scholes option pricing model.



|                                                                                                                                            |  |                                      |        |   |      |   |        |  
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------ | ------ | - | ---- | - | ------ | -
|                                                                                                                                            |  | For the Three Months Ended March 31, |       
|                                                                                                                                            |  | 2004                                 |        |   | 2003 |  
|                                                                                                                                            |  | (in thousands, exceptper share data) |       
|Net Income:                                                                                                                                 |  |                                      |        |   |      |   |        |  
|As reported                                                                                                                                 |  | $                                    | 10,018 |   |      | $ | 10,721 |  
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax
effects |  |                                      | (573   | ) |      |   | (610   | )
|                                                                                                                                            |  |                                      |        |   |      |   |        |  
|Pro forma                                                                                                                                   |  | $                                    | 9,445  |   |      | $ | 10,111 |  
|                                                                                                                                            |  |                                      |        |   |      |   |        |  
|Basic earnings per share:                                                                                                                   |  |                                      |        |   |      |   |        |  
|As reported                                                                                                                                 |  | $                                    | 0.40   |   |      | $ | 0.43   |  
|Pro forma                                                                                                                                   |  |                                      | 0.37   |   |      |   | 0.41   |  
|Diluted earnings per share:                                                                                                                 |  |                                      |        |   |      |   |        |  
|As reported                                                                                                                                 |  | $                                    | 0.39   |   |      | $ | 0.43   |  
|Pro forma                                                                                                                                   |  |                                      | 0.37   |   |      |   | 0.41   |  



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NOTE 10  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, in the normal course of its business, regularly offers financial and performance standby letters of credit to its BANK customers. 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 March 31, 2004, the maximum remaining term for any outstanding standby letters of credit was approximately seven years, expiring on December 15, 2010.



A fee of one to two percent of face value is normally charged to the BANK
customer and is recognized as income over the term of the standby letter of credit. The carrying value of deferred fees, as of March 31, 2004, was $879,000.



At March 31, 2004, the contractual amount of these letters of credit, which represents the maximum potential amount of future payments that the Company would be obligated
to pay under the guarantees, was $182.7 million, with $155.6 million in financial standby letters of credit and $27.1 million in performance standby letters of credit.



The issuance of either a financial or performance standby letter of credit is generally backed by collateral. The collateral can take
various forms including bank accounts, investments, fixed assets, inventory, accounts receivable and real estate, among other things. 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 letters of credit.



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NOTE 11  EARNINGS PER SHARE (EPS)



Earnings per share calculations are as follows:



|                                    |  |                                      |        |      |   |       
|----------------------------------- |  | ------------------------------------ | ------ | ---- | - | ------
|                                    |  | For the Three MonthsEnded March 31, 
|                                    |  | 2004                                 |        | 2003
|                                    |  | (in thousands, exceptper share data)
|Net Income                          |  | $                                    | 10,018 |      | $ | 10,721
|Basic earnings per share:           |  |                                      |        |      |   |       
|Average basic shares outstanding    |  |                                      | 25,210 |      |   | 24,792
|                                    |  |                                      |        |      |   |       
|Earnings per share                  |  | $                                    | 0.40   |      | $ | 0.43  
|                                    |  |                                      |        |      |   |       
|Diluted earnings per share:         |  |                                      |        |      |   |       
|Weighted average shares outstanding |  |                                      | 25,210 |      |   | 24,792
|Dilutive shares                     |  |                                      | 267    |      |   | 140   
|Contingently issuable shares        |  |                                      | 23     |      |   | 4     
|                                    |  |                                      |        |      |   |       
|Average diluted shares outstanding  |  |                                      | 25,500 |      |   | 24,936
|                                    |  |                                      |        |      |   |       
|Diluted earnings per share          |  | $                                    | 0.39   |      | $ | 0.43  
|                                    |  |                                      |        |      |   |       



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 that 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 meaning that, for the purposes of this calculation, all outstanding options are assumed to have been exercised
during the period and the resulting proceeds used to repurchase Company stock at the average market price during the period. 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 12 - SEGMENT INFORMATION



AMCOREs internal reporting and planning process focuses on its four primary business Segment(s): Commercial Banking, Retail Banking,
Trust and Asset Management, 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, 2003.



Since there are no comprehensive authorities for management accounting equivalent to accounting principles generally accepted in the United States of America, 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. During the first quarter of 2004, for presentation purposes and greater comparability with industry practices, certain loan origination costs have been
reclassified and netted against mortgage banking income in the Consolidated Statements of Income. These reclassifications resulted in an equal decrease to compensation expense and employee benefits. The reclassifications had no effect on
Stockholders Equity or net income as previously reported.



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 are included in the Other column.



The Company provides Commercial and Retail banking services through its 63 banking locations. The Commercial Banking Segment provides services including lending, business
checking and deposits, treasury management and other traditional as well as electronic commerce commercial banking services to large and small business customers. The Retail Banking Segment provides 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 retail banking services to individual customers. The Trust and Asset Management
segment provides trust, investment management, employee benefit recordkeeping and administration and brokerage services. It also acts as advisor and provides fund administration to the Vintage Mutual Funds and various public fund programs. These
products are distributed nationally (i.e. Vintage Equity Fund is available through Charles Schwab, One Source), regionally to institutional investors and corporations, and locally through AMCOREs BANK locations. 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 March 31, 2004



|                                          |  |                    |           |   |               |   |         |                           |  |   |                 |   |  |       |         |    |              |   |           |   |  |   |           |  
|----------------------------------------- |  | ------------------ | --------- | - | ------------- | - | ------- | ------------------------- |  | - | --------------- | - |  | ----- | ------- | -- | ------------ | - | --------- | - |  | - | --------- | -
|                                          |  | Operating Segments |           |   |               |   |         |                           | 
|                                          |  | CommercialBanking  |           |   | RetailBanking |   |         | Trust and AssetManagement |  |   | MortgageBanking |   |  | Other |         |    | Consolidated |  
|                                          |  |                    |           |   |               |   |         | (dollars in thousands)    |  |   |                 |   |  |       |        
|Net interest income                       |  | $                  | 20,280    |   |               | $ | 10,492  |                           |  | $ | 8               |   |  | $     | 2,408   |    |              | $ | 4,100     |   |  | $ | 37,288    |  
|Non-interest income                       |  |                    | 2,325     |   |               |   | 3,434   |                           |  |   | 6,563           |   |  |       | (169    | )  |              |   | 5,376     |   |  |   | 17,529    |  
|                                          |  |                    |           |   |               |   |         |                           |  |   |                 |   |  |       |         |    |              |   |           |   |  |   |           |  
|Total revenue                             |  |                    | 22,605    |   |               |   | 13,926  |                           |  |   | 6,571           |   |  |       | 2,239   |    |              |   | 9,476     |   |  |   | 54,817    |  
|Provision for loan losses                 |  |                    | 2,084     |   |               |   | 2,692   |                           |  |   |                |   |  |       | (101    | )  |              |   |          |   |  |   | 4,675     |  
|Depreciation and amortization             |  |                    | 150       |   |               |   | 597     |                           |  |   | 98              |   |  |       | 8       |    |              |   | 1,139     |   |  |   | 1,992     |  
|Other non-interest expense                |  |                    | 10,166    |   |               |   | 10,253  |                           |  |   | 5,502           |   |  |       | 2,778   |    |              |   | 6,060     |   |  |   | 34,759    |  
|                                          |  |                    |           |   |               |   |         |                           |  |   |                 |   |  |       |         |    |              |   |           |   |  |   |           |  
|Pretax earnings (loss)                    |  |                    | 10,205    |   |               |   | 384     |                           |  |   | 971             |   |  |       | (446    | )  |              |   | 2,277     |   |  |   | 13,391    |  
|Income taxes (benefits)                   |  |                    | 3,916     |   |               |   | 150     |                           |  |   | 398             |   |  |       | (174    | )  |              |   | (917      | ) |  |   | 3,373     |  
|                                          |  |                    |           |   |               |   |         |                           |  |   |                 |   |  |       |         |    |              |   |           |   |  |   |           |  
|Earnings (loss)                           |  | $                  | 6,289     |   |               | $ | 234     |                           |  | $ | 573             |   |  | $     | (272    | )  |              | $ | 3,194     |   |  | $ | 10,018    |  
|                                          |  |                    |           |   |               |   |         |                           |  |   |                 |   |  |       |         |    |              |   |           |   |  |   |           |  
|Segment profit (loss) percentage          |  |                    | 92.2      | % |               |   | 3.4     | %                         |  |   | 8.4             | % |  |       | (4.0    | %) |              |   | N/A       |   |  |   | 100.0     | %
|                                          |  |                    |           |   |               |   |         |                           |  |   |                 |   |  |       |         |    |              |   |           |   |  |   |           |  
|Assets                                    |  | $                  | 2,104,049 |   |               | $ | 821,085 |                           |  | $ | 17,885          |   |  | $     | 251,995 |    |              | $ | 1,424,022 |   |  | $ | 4,619,036 |  
|                                          |  |                    |           |   |               |   |         |                           |  |   |                 |   |  |       |         |    |              |   |           |   |  |   |           |  
|For the three months ended March 31, 2003 |  |                    |           |   |               |   |         |                           |  |   |                 |   |  |       |         |    |              |   |           |   |  |   |           |  
|Net interest income                       |  | $                  | 18,435    |   |               | $ | 11,506  |                           |  | $ | 12              |   |  | $     | 3,332   |    |              | $ | 1,231     |   |  | $ | 34,516    |  
|Non-interest income                       |  |                    | 3,997     |   |               |   | 11,897  |                           |  |   | 6,527           |   |  |       | 2,913   |    |              |   | 3,088     |   |  |   | 28,422    |  
|                                          |  |                    |           |   |               |   |         |                           |  |   |                 |   |  |       |         |    |              |   |           |   |  |   |           |  
|Total revenue                             |  |                    | 22,432    |   |               |   | 23,403  |                           |  |   | 6,539           |   |  |       | 6,245   |    |              |   | 4,319     |   |  |   | 62,938    |  
|Provision for loan losses                 |  |                    | 10,161    |   |               |   | 2,023   |                           |  |   |                |   |  |       | 391     |    |              |   |          |   |  |   | 12,575    |  
|Depreciation and amortization             |  |                    | 172       |   |               |   | 530     |                           |  |   | 115             |   |  |       | 9       |    |              |   | 829       |   |  |   | 1,655     |  
|Other non-interest expense                |  |                    | 8,014     |   |               |   | 9,824   |                           |  |   | 5,197           |   |  |       | 2,572   |    |              |   | 8,732     |   |  |   | 34,339    |  
|                                          |  |                    |           |   |               |   |         |                           |  |   |                 |   |  |       |         |    |              |   |           |   |  |   |           |  
|Pretax earnings (loss)                    |  |                    | 4,085     |   |               |   | 11,026  |                           |  |   | 1,227           |   |  |       | 3,273   |    |              |   | (5,242    | ) |  |   | 14,369    |  
|Income taxes (benefits)                   |  |                    | 1,503     |   |               |   | 4,300   |                           |  |   | 498             |   |  |       | 1,276   |    |              |   | (3,929    | ) |  |   | 3,648     |  
|                                          |  |                    |           |   |               |   |         |                           |  |   |                 |   |  |       |         |    |              |   |           |   |  |   |           |  
|Earnings (loss)                           |  | $                  | 2,582     |   |               | $ | 6,726   |                           |  | $ | 729             |   |  | $     | 1,997   |    |              | $ | (1,313    | ) |  | $ | 10,721    |  
|                                          |  |                    |           |   |               |   |         |                           |  |   |                 |   |  |       |         |    |              |   |           |   |  |   |           |  
|Segment profit percentage                 |  |                    | 21.5      | % |               |   | 55.9    | %                         |  |   | 6.1             | % |  |       | 16.5    | %  |              |   | N/A       |   |  |   | 100.0     | %
|                                          |  |                    |           |   |               |   |         |                           |  |   |                 |   |  |       |         |    |              |   |           |   |  |   |           |  
|Assets                                    |  | $                  | 1,909,228 |   |               | $ | 818,872 |                           |  | $ | 18,906          |   |  | $     | 343,173 |    |              | $ | 1,278,119 |   |  | $ | 4,368,298 |  
|                                          |  |                    |           |   |               |   |         |                           |  |   |                 |   |  |       |         |    |              |   |           |   |  |   |           |  



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NOTE 13- BENEFIT PLANS



Employee Benefit Plans. All subsidiaries 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, a cash profit sharing payment and a personal savings account 401(k). The expense related to the Security Plan and other similar plans
from acquired companies for the three months ended March 31, 2004 and 2003 was approximately $1.49 million and $1.47 million, respectively.



In addition to the Security Plan, certain health care and life insurance benefits are made available to active employees. The Companys share of cost of these
benefits is expensed as incurred. Group health benefits are offered to retirees with 100% of the cost borne by the retiree.



The Company provides a deferred compensation plan (entitled AMCORE Financial, Inc. Deferred Compensation Plan) for senior officers and directors. This plan
provides the opportunity to defer salary, bonuses and non-employee director fees.



The Company provides additional retirement benefits to certain key executives 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 qualified plans in the absence of limits placed on
qualified plan benefits by the Internal Revenue Code of 1986. The expense related to this arrangement was $50,000 and $77,000 for the three months ended March 31, 2004 and 2003, respectively.



Another arrangement 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 social security and other employer retirement plan
contributions. The measurement date for obligations for this plan are determined in January when estimated offsets from employer sponsored retirement plans are annually re-evaluated. The following table summarizes the net periodic benefit cost
recognized for the periods ended March 31, 2004 and 2003:



|                                         |  |                        |      |   |      |   |      |  
|---------------------------------------- |  | ---------------------- | ---- | - | ---- | - | ---- | -
|                                         |  | Quarter endedMarch 31, |     
|                                         |  | 2004                   |      |   | 2003 |  
|                                         |  | (in thousands)         |     
|Components of net periodic benefit cost: |  |                        |      |   |      |   |      |  
|Service cost                             |  | $                      | 4    |   |      | $ | 17   |  
|Interest cost                            |  |                        | 23   |   |      |   | 21   |  
|Actuarial losses and decrease in offsets |  |                        | 14   |   |      |   | 45   |  
|                                         |  |                        |      |   |      |   |      |  
|Net periodic cost                        |  | $                      | 41   |   |      | $ | 83   |  
|                                         |  |                        |      |   |      |   |      |  
|Weighted-average assumptions:            |  |                        |      |   |      |   |      |  
|Discount rate                            |  |                        | 6.00 | % |      |   | 6.11 | %
|Rate of compensation increase            |  |                        | 3.00 | % |      |   | 4.00 | %



As of March 31, 2004, $134,109 was
contributed to the plan to fund distributions to plan participants. No additional contributions or distributions are expected during 2004.



Directors Benefits.The Company pays a lifetime annual retainer to certain retired directors. Effective January 1, 1993, the Company adopted SFAS No. 106,
Employers Accounting for Postretirement Benefits Other Than Pensions to account for these benefits. This statement requires employers to recognize postretirement benefits on an accrual basis rather than on a cash basis. The expense
for the three months ended March 31, 2004 and 2003 related to this plan was $54,000 and $40,000, respectively. The transition obligation, representing the present value of future payments upon adoption of accrual basis accounting was approximately
$842,000 and is being amortized over a twenty-year period.



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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 March 31, 2004 compared to December 31, 2003 and the consolidated results of operations for the three months ended March 31, 2004 compared to the same period in 2003. 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 our 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; (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 prepayment; (VII) general economic and business conditions which are less favorable than
expected; (VIII) equity and fixed income market fluctuations; (IX) unanticipated changes in industry trends; (X) unanticipated changes in credit quality and risk factors; (XI) success in gaining regulatory approvals when required; (XII) changes in
Federal Reserve Board monetary policies; (XIII) 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 accounting
principles generally accepted in the United States of America; (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; and (XVIII) disruption of operations caused by the conversion and installation of data processing systems.



OVERVIEW OF OPERATIONS



AMCORE reported net income of $10.0 million for the three months ended March 31, 2004. This compares to $10.7 million for the same period in 2003, representing a decline
of $703,000 or 7%. Diluted earnings per share were $0.39 for the three months ended March 31, 2004, compared to $0.43 for the same period in 2003. This represents a decrease of $0.04 per diluted share or 9%.



AMCOREs annualized return on average equity for the first quarters of 2004 and 2003 was
10.50% and 12.01%, respectively. The annualized return on average assets was 0.88% and 0.98% for the first quarters of 2004 and 2003, respectively.



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Branch Strategy



The Companys Branch Strategy for its banking operations (BANK) was launched in 2001 and includes $58 million in previously announced incremental capital spending
committed for the opening and/or upgrading of offices in select markets, particularly along the I-90 growth corridor between Chicagos northwest suburbs, Madison, Wisconsin and Milwaukee, Wisconsin (the Branch Expansion), combined
with the exiting of certain markets that no longer fit its growth objectives (the Branch Sales). The BANKs Branch Expansion strategy initially targets markets where there are strong population growth rates and high concentrations
of mid-size businesses, with a seasoned commercial service staff in a leased facility (limited branch office or LBO). Once a book of business is developed and the branch becomes profitable, a more permanent site for a full service
facility is sought.



Since the launching of the Branch Strategy in 2001, Branch
Sales have included seven Illinois branches and six Wisconsin branches. The Wisconsin Branch Sales occurred during the first quarter of 2003. Combined loans, deposits and premises and equipment of $48 million, $125 million and $2 million,
respectively, were sold to the respective buyers of the Wisconsin branches, resulting in a pre-tax gain of $8.2 million or a net after-tax gain of $4.9 million (also referred to as Branch Gain). The BANK currently has no plans to sell
any additional branches.



Since April 2001, Branch Expansion activity has
resulted in 22 new branches, which include ten LBOs and twelve full service facilities. During this time the BANK closed six offices, when they were upgraded to new facilities, for a net total of sixteen branches. Increased capabilities in the
markets served by these facilities is expected to accelerate the Companys ability to generate deposits, which will better support loan growth and decrease the use of wholesale funding. Since the inception of the Branch Expansion strategy, the
new locations have generated $614 million in loans and $304 million in deposits outstanding as of March 31, 2004. Same store contributions, which include new branches opened at least one year, were $563 million in loans and $207 million in deposits.



The impact of Branch Expansion in the first quarter 2004 was dilution of $0.04
per share compared to dilution of $0.02 cents per share during the same quarter a year ago. The Company expects Branch Expansion costs to initially outpace Branch Expansion net revenues through the third quarter of 2004 and anticipates that the
impact on earnings per share for the full-year of 2004 will be dilution in the range of $0.04 to $0.08 per share. The Branch Expansion strategy is expected to be accretive to earnings per share in the range of $0.10 to $0.15 per share in 2005.



By 2006, AMCORE will have added 24 new branches, net of closed branches, since
the Branch Expansion began in 2001. For the remainder of 2004, this includes an LBO in Lake Zurich, Illinois and seven full service facilities in the Illinois communities of Elgin, Naperville, Peru, Schaumburg, Aurora, Carol Stream and Morton Grove.
As a result, four existing LBOs and two in-store branches will be closed. Total offices by the end of 2006 are expected to number 74, two-thirds of which will be located in markets that the Company believes to exhibit characteristics of higher
growth. See Table 4 for a presentation of the Companys Branch Expansion plans.



As a complement to its Branch Expansion, the BANK added 52 additional automated teller machines (ATMs) in Illinois and 19 in Wisconsin that are owned and operated by an unaffiliated third party. Existing ATMs owned and operated
by the BANK include 65 in Illinois and 16 in Wisconsin. Total ATM presence in Illinois and Wisconsin is 117 and 35, respectively, or 152 overall.



Loan Securitizations



During the first quarter of 2003, the BANK sold $106.0 million of indirect automobile loans in a securitization transaction (the Auto Loan Sale), reporting a pre-tax gain of $2.5 million or a net after-tax
gain of $1.5 million (the Auto Loan Sale Gain). Upon securitization, the BANK retained certain residual interests. The BANKs retained interests are subordinate to investors interests and are subject to prepayment risk,
interest-rate risk and credit risk on the transferred auto loans. The investors and the securitization trust have no other



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recourse to the BANKs other assets for failure of debtors to pay when due. See Note 5 of the Notes to Consolidated Financial Statements.



EARNINGS REVIEW OF CONSOLIDATED INCOME STATEMENT



The following highlights a comparative discussion of the major components of net income and
their impact for the three months ended March 31, 2004 and 2003.



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%. Adjusted interest income is as follows (in
thousands):



|                              |  |                |        |                |   |       
|----------------------------- |  | -------------- | ------ | -------------- | - | ------
|                              |  | Quarters Ended
|                              |  | March 31, 2004 |        | March 31, 2003
|Interest Income Book Basis    |  | $              | 56,355 |                | $ | 59,753
|FTE Adjustment                |  |                | 1,037  |                |   | 1,527 
|                              |  |                |        |                |   |       
|Interest Income FTE Basis     |  |                | 57,392 |                |   | 61,280
|Interest Expense              |  |                | 19,067 |                |   | 25,237
|                              |  |                |        |                |   |       
|Net Interest Income FTE Basis |  | $              | 38,325 |                | $ | 36,043
|                              |  |                |        |                |   |       



Net interest income on an FTE basis
increased $2.3 million or 6% in the first quarter of 2004 compared to the same period in 2003, as net average volumes, spread and net interest margin all showed improvement.



The net interest spread is the difference between the average rates earned on interest-earning assets and the average rates owed on
interest-bearing liabilities. The 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 interest rate spread increased 15 basis points to 3.40% in the
first quarter of 2004 from 3.25% in the first quarter of 2003. The net interest margin was 3.65% in the first quarter of 2004, an increase of 9 basis points from 3.56% in the first quarter of 2003.



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 and changes due to the extra day in 2004 due to leap year have been allocated between changes due to average volume and changes due to
average rate based on the absolute value of each to the total change of both categories. Because of changes in the mix of the components of interest-earning assets and interest-bearing liabilities, the computations for each of the components may not
equal the calculation for interest-earning assets as a total, or interest-bearing liabilities as a total. Table 2 analyzes the changes attributable to the volume and rate components of net interest income.



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Changes Due to Volume



In the first quarter of 2004, interest income on an FTE basis increased due to average volume by $1.6 million when compared to the first quarter of 2003. This was
comprised of a $2.1 million increase in interest income net of a $542,000 increase in interest expense.



The $2.1 million increase in interest income was driven by a $122 million or 4% increase in average loans and a $44 million or 4% increase in average investment securities. Partially offsetting these increases was a
$28 million or 52% decline in loans held for sale. The growth in average loans occurred despite the sale of $48 million in loans in connection with the Wisconsin Branch Sales and $106 million in Auto Loan Sales during the first quarter of 2003. The
increase in average loan balances was attributable to $226 million in commercial lending driven by AMCOREs expansion in the Chicago suburban and Madison area markets. Partially offsetting AMCOREs commercial loan growth was a $68 million,
or 15%, average decline in 1-to-4 family real estate loans. The high level of refinancing activity experienced during the first quarter 2003 slowed somewhat in the first quarter 2004 and is expected to remain at lower levels compared to the previous
year. Consumer loan balances also declined $36 million or 6% and was due to the Auto Loan Sale in the first quarter 2003. The growth in average investment securities was attributable to agency mortgage-backed securities as the Company sought to
replace mortgage-related assets that prepaid during the mortgage re-financing boom in 2002 and 2003. The decline in loans held for sale was attributable to the slowdown in mortgage refinancing activity.



In addition to the decline in average loans held for sale, the increases in average loans and
investment securities were funded by a $226 million or 8% increase in average bank-issued deposits. This growth occurred despite the transfer of $125 million of deposits in connection with the Wisconsin Branch Sales in the first quarter of 2003. The
increase in bank-issued deposits also enabled the BANK to reduce its average wholesale funding, primarily brokered certificate of deposits (CDs) by $98 million. The increase in average bank-issued deposits was attributable to a
Company-wide initiative to attract deposits, especially transaction deposits, and the Branch Expansion. AMCORE recognizes the importance of continued bank-issued deposit growth, not only as a means of funding the Branch Expansion and other loan
growth, but also to continue the strategy of reducing wholesale funding. The transition to full-service branches in new growth markets as the Branch Expansion develops, continued emphasis on attracting and retaining primary transaction accounts, and
Auto Loan Sales are all means by which the Company has implemented and expects to continue to implement these strategies.



Changes Due to Rate



During the first quarter of 2004, net interest income on an FTE basis increased due to average rates by $719,000 when compared with the same quarter of 2003. This was comprised of a $6.0 million decline in interest
income that was more than offset by a $6.7 million decrease in interest expense.



The yield on earning assets declined 60 basis points during the first quarter of 2004, when compared to the same period a year ago. The yield on average loans fell by 62 basis points, as interest rates that have been declining since January
2001 continue to impact pricing on new loan volume, variable priced loans which represent an increasing percentage of the Companys loan portfolio, and loans that prepaid or refinanced during the year. While all loan categories registered
declines, the largest dollar decrease was attributable to commercial real estate loans. The yield on average securities decreased by 57 basis points. This decrease was attributable to lower rates earned on replacement of mortgage-backed securities
in the wake of the accelerated prepayments during the past year. Partially offsetting the decline was lower premium amortization on mortgage-backed securities as prepayment activity waned in the first quarter of 2004, compared to the prior year.



The rate paid on interest-bearing liabilities declined 75 basis points during
the first quarter of 2004, compared to the first quarter of 2003. The decline was driven by lower rates paid on CDs (including brokered CDs), as older CDs bearing higher rates matured and re-priced during the period of lower interest rates.
Borrowing costs also declined due to lower rates on reverse repurchase agreement renewals and favorable hedge performance.



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The Company currently expects modest improvement in interest rate spread and margin for 2004, compared to 2003.
Specifically, the Company expects continuing benefits from deposit re-pricing during the balance of the year. Among those factors that could cause margin and spread not to improve as anticipated by the Company include: unanticipated changes in
interest rates, changes in the shape of the yield curve, the effect of prepayments or renegotiated rates, increased price competition on both deposits and loans, changes in the mix of earning assets and the mix of liabilities, including greater than
anticipated use of expensive wholesale sources to fund the Branch Expansion and greater than expected loan delinquencies resulting in non-accrual status.



Provision for Loan Losses



The provision for loan losses (Provision) is an amount added to the allowance for loan losses (Allowance) for loan losses that are probable as of
the respective reporting date. Actual loan losses are charged against (reduce) the Allowance when management believes that the collection of principal will not occur. Subsequent recoveries of amounts previously charged to the Allowance, if any, are
credited to (increase) the Allowance.



The Allowance 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 other loss estimates that are based upon the size, quality, and
concentration characteristics of the various loan portfolios, adverse situations that may affect a borrowers ability to repay, and current economic and industry conditions, among other things. 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 $4.7 million in the first quarter of 2004, a decrease of $7.9 million or 63% from the $12.6 million in the first quarter of 2003. Lower net charge-offs, improved credit quality due to expansion of
workout and collection staffs that enabled the Company to address deteriorating credits more quickly before further losses in value, improvement in the overall and local economies, lower non-accrual loans and delinquencies and reduced concerns over
loan concentrations quarter-to-quarter were the primary factors leading to the decreased Provision. These were partially offset by increased pool allocations associated with higher historical loss experience net of reduced allocations associated
with loans that were sold in the Auto Loan Sale and the Branch Sale.



Future
growth in the loan portfolio, weakening economic conditions, specific credit deterioration, or declines in collateral values, among other things, could result in increased Provisions during the remainder of 2004 compared to 2003.



Non-Interest Income



Total non-interest income is comprised primarily of fee-based revenues from trust and asset management, bank-related service charges on
deposits and mortgage banking income. Net security gains or losses, gains on Auto Loan Sales and Branch Sales and increases in cash surrender value (CSV) and death benefits on bank and company owned life insurance (COLI) are
also included in this category.



Non-interest income, including net security
gains, totaled $17.5 million in the first quarter of 2004, a decline of $10.9 million or 38% from $28.4 million in the first quarter of 2003. The decrease was primarily related to the $8.2 million pre-tax Branch Gain and the $2.5 million pre-tax
Auto Loan Sale Gain, each of which occurred in the first quarter 2003. A decline in mortgage banking income was offset by increased security gains, higher COLI income, gain on loan sales in the current year and increased other income.



Trust and asset management revenue totaled $5.5 million in the first quarter of 2004, a
decrease of $222,000 or 4% from $5.7 million in the first quarter of 2003. However, when compared to the fourth quarter of 2003,



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revenues were up modestly, despite the loss of a major public fund customer effective October 1, 2003. Revenues from this customer were $1.1 million in 2002
and $916,000 in 2003.



The trust and asset management segment manages or
administers $4.3 billion of investments. Assets in the AMCORE Vintage Mutual Funds totaled $794 million at March 31, 2004. These numbers compare to $4.4 billion and $845 million, respectively, as of March 31, 2003. In addition to overall market
performance, trust and asset management revenues are dependent upon the Companys ability to attract and retain accounts, specific investment performance and other economic factors. Fees from money market mutual funds, which comprise
approximately 14% of managed assets, can also be negatively affected as the federal funds purchased (FED Funds) rate approaches 1.00%, a level generally viewed as a minimum acceptable return by investors. At this level, investors may
seek alternative investments. Thus, waivers of fees on money market mutual funds have been and may continue to be required to provide more competitive returns for investors as a means of inducing investors to maintain their level of investments.
During the first quarter of 2004, approximately $94,000 of fees were waived. Fees waivers for the first quarter of 2003 were insignificant.



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 right amortization and impairment. Mortgage banking was a loss of $385,000 in the first quarter of 2004, a decline of $3.4 million from $3.0 million in the first quarter of 2003. Contributing to the $3.4 million
decline was a $1.7 million mortgage servicing right impairment charge in the first quarter of 2004. The rest of the decline was primarily volume driven as mortgage closings declined 52% to $98 million in the first quarter of 2004, from $205 million
in the first quarter of 2003. Of total first quarter 2004 closings, 56% were due to refinancing compared to 82% a year ago. The decline in volume was expected as refinancing activity began to slow during the fourth quarter of 2003. However,
refinancing activity picked up again in March 2004, causing a surge in applications late in the quarter, as mortgage loan applications at $201 million were more than double the amount of loan closings for the quarter. Second quarter 2004 revenues
are expected to reflect an increase from first quarter 2004 levels as these mortgage loans close. In addition, the Company expects continued growth in new purchase home mortgages resulting from additional mortgage loan originators, primarily in
Branch Expansion markets.



As of March 31, 2004, the carrying value of
AMCOREs capitalized mortgage servicing rights was $9.7 million net of a $1.7 million impairment valuation allowance. The unpaid principal balance of mortgage loans serviced for others was $1.2 billion as of March 31, 2004. This compares to
$1.1 billion as of March 31, 2003.



COLI income totaled $2.2 million in the
first quarter of 2004, a $386,000 or 22% increase from $1.8 million in the first quarter of 2003. This included a $270,000 increase in net death benefits in the first quarter of 2004 compared to the same period in 2003. The remaining increase is due
to additional investments and the impact of compounding, which are partially offset by lower yields due to declining interest rates. 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 March 31, 2004, the CSV of COLI stood at $120 million compared to $111 million at March 31, 2003. Subsequent to the end of the first quarter of 2004,
the Company was advised by the broker for one of its COLI carriers of a potential change in estimate in the policys CSV. As a result, the Company expects that during the second quarter, a reduction of the current balance of the cash surrender
value relating to this policy may be recorded, which could total as much as $350,000.



Other non-interest income includes customer service charges, bank fees, brokerage and insurance commissions, gains on fixed asset sales and other miscellaneous income. In the first quarter of 2004, other non-interest income was $3.3
million, a $758,000 or 30% increase from the first quarter of 2003. Increases in net mark-to-market adjustments on derivatives and in brokerage and insurance commissions were the primary reasons for the increase. Recent litigation involving
MasterCard and VISA concerning the amount of fees charged to process signature-based debit card transactions are expected to reduce the amount of interchange income that AMCORE receives on the debit cards that it issues. Rate reductions of
approximately 30% became effective August 1, 2003. Effective January 1, 2004, merchants may also refuse to accept signature-based debit card transactions. This is likely to result in additional reductions in interchange income for 2004 that could be
material. At this time it is not possible to accurately predict the magnitude of this reduction since it will be driven by the individual practices and policies of the point-of-sale merchant. For the first quarter of 2004, compared to the same
period in 2003, the Companys bankcard fee



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income reflected a modest increase, primarily due to increased fees on new card issuances and higher volume.



Security gains of $1.9 million were recognized during first quarter 2004, a $1.6 million
increase over the prior year period. The level of security gains or losses is dependent on the size of the available for sale portfolio, pledging requirements, interest rate levels, AMCOREs liquidity needs, and balance sheet risk objectives.



Operating Expenses



Total operating expense was $36.8 million in the first quarter of 2004, an increase of
$757,000 or 2%, from $36.0 million in the first quarter of 2003. Lower data-processing expenses and a $1.6 million charge for a debt extinguishment included in first quarter 2003 expenses largely offset increased personnel costs. The efficiency
ratio was 67% in the first quarter of 2004, compared to 57% in the first quarter of 2003. The efficiency ratio is calculated by dividing total operating expenses by the sum of net interest income and non-interest income.



Compensation expense is the largest component of operating expenses, totaling $17.3 million
in the first quarter of 2004, an increase of $2.4 million or 16% from $14.9 million in the first quarter of 2003. The increase included $1.9 million in salaries and wages associated with the Branch Expansion, net of reductions due to the Branch
Sales. The remaining increase included annual merit and cost-of-living increases.



Employee benefit costs were $5.1 million in the first quarter of 2004 compared to $4.5 million in the first quarter of 2003, representing a $581,000 or 13% increase. The increase was due to higher payroll taxes and employee health costs.
These were influenced by higher staffing levels due to Branch Expansion, medical cost inflation and higher healthcare claims experience.



Net occupancy expense for the first quarters of 2004 and 2003 was $2.5 million and $2.1 million, respectively, an increase of $383,000 or 18%. The increase was due to
Branch Expansion strategy. Equipment expense was flat at $2.5 million quarter-to-quarter as increased Branch Expansion costs incurred in the first quarter of 2004 were offset by a decrease in personal computer replacements and related costs compared
to the first quarter of 2003, which were higher due to the data processing conversion.



Data processing expense was $584,000 in the first quarter of 2004, a decline of $1.2 million or 67% compared to $1.8 million for the same period in 2003. The decrease was due to lower processing costs resulting from the conversion from an
outsourced data processing system to a new in-house data processing system.



Other expenses were $4.9 million in the first quarter of 2004, a decrease of $1.5 million or 24% from $6.4 million in the first quarter of 2003. The increase was primarily due to $1.6 million in prepayment penalties related to restructuring
of Federal Home Loan Bank (FHLB) advances in the first quarter of 2003.



Income Taxes



Income tax expense totaled $3.4 million in the
first quarter of 2004, compared with $3.6 million in the first quarter of 2003, a decrease of $275,000 or 8%. The decrease was due to lower earnings before taxes, and a higher proportion of tax-exempt COLI income net of higher effective state income
rates.



The effective tax rates were 25.2% and 25.4% in the first quarters of
2004 and 2003, 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 not taxable.



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, Trust and Asset Management, and Mortgage Banking. Note 12 of the



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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 appropriate 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 in the Companys Annual Report on Form 10-K for the year ended December 31, 2003.



Since there are no comprehensive authorities for management accounting equivalent to
accounting principles generally accepted in the United States of America, 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 intersegment
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 of Note 12 of the Notes to Consolidated Financial Statements.



Commercial Banking



The Commercial Banking Segment (Commercial) provides commercial banking services to large and small business customers through the BANKs 63 banking locations. The services provided by this Segment
include lending, business checking and deposits, treasury management and other traditional as well as electronic commercial banking services.



Commercial earnings for the first quarter of 2004 were $6.3 million, an increase of $3.7 million or 144% from the first quarter of 2003. A decrease in Provision expense,
partially offset by an increase in other non-interest expense and higher income tax expense were the primary reasons for the increase. Increases in net interest income were nearly offset by a decline in non-interest income.



Net interest income increased $1.8 million in the first quarter of 2004 compared to the same
period a year ago due to increases in interest income, lower interest expense and lower cost of funds allocations. The increase in interest income was due to higher average commercial real estate loan volumes, due in large part to the Branch
Expansion, net of lower yields on all major commercial loan categories. The decrease in interest expense was to due lower deposit rates. The lower yields on loans, reduced rates on deposits and decreased cost of funds allocations were all
attributable to declining short-term interest rates since January of 2001, which have impacted new product (loans and deposits) pricing as well as the re-pricing of variable priced products and fixed-price product renewals or prepayments.



Non-interest income declined $1.7 million in the first quarter of 2004 when
compared to the same period a year ago. The first quarter of 2003 included $2.2 million of Branch Gain allocable to Commercial, whereas the first quarter of 2004 included $612,000 of gains on the sale of the guaranteed portion of SBA loans.



The first quarter 2004 Provision declined $8.1 million from the same period in
2003. The decrease was due to lower net charge-offs, improved credit quality due to expansion of workout and collection staffs that enabled the Company to address deteriorating credits more quickly before further losses in value, improvement in the
overall and local economies, lower non-accrual loans and delinquencies and reduced



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concerns over loan concentrations quarter-to-quarter were the primary factors leading to the decreased Provision. These were partially offset by increased
pool allocations associated with higher historical loss experience.



Operating
expenses increased $2.1 million in the first quarter of 2004 compared to the first quarter of 2003. The increase was largely due to increased Branch Expansion expenses, particularly higher personnel costs.



Income taxes increased $2.4 million quarter-to-quarter, due to higher pre-tax earnings.



The Commercial Segment represented 92% and 22% of total Segment earnings in
the first quarters of 2004 and 2003, respectively. Commercial Segment total assets were $2.1 billion at March 31, 2004 and represented 46% of total consolidated assets.



Retail Banking



The Retail Banking Segment (Retail) provides retail-banking services to individual customers through the BANKs 63 banking locations in northern Illinois
and south central 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 retail banking services.



Retail earnings for the first quarter of 2004 were $234,000, a decrease of
$6.5 million or 97% from the first quarter of 2003, primarily due to the Branch Gain in the first quarter of 2003.



Net interest income decreased by $1.0 million in the first quarter of 2004 due to lower interest income and reduced funds credit allocations that were partly offset by
lower interest expense. Both average loan volumes and loan yields declined from the prior year first quarter, resulting in the decrease in interest income. The decline in average loan volumes was primarily the result of the Wisconsin Branch Sales
and the Auto Loan Sale, both of which occurred late in the first quarter of 2003. The decrease in interest expense was due to lower deposit rates. The lower yields on loans, reduced rates on deposits and reduced funds credit allocations were all
attributable to declining short-term interest rates since January of 2001, which have impacted new product (loans and deposits) pricing as well as the re-pricing of variable priced products and fixed-price product renewals or prepayments.



Non-interest income declined $8.5 million in the first quarter of 2004,
compared to the same period in 2003. The decline was attributable to the $6.0 million Branch Gain and the $2.5 million Auto Loan Sale Gain, both of which occurred during the first quarter of 2003.



The first quarter 2004 Provision increased by $669,000 compared to the first quarter of 2003.
The increase in the Provision was primarily attributable to increased pool allocations associated with higher historical loss experience net of reduced allocations associated with loans that were sold in the Auto Loan Sale.



Operating expenses increased by $496,000 when comparing the first quarter of 2004 with the
same quarter in 2003. The increase was primarily due to increased costs for premises and equipment and higher support function allocations. Increased premises and equipment costs were due in part to Branch Expansion.



Income taxes decreased $4.2 million quarter-to-quarter due to lower pre-tax earnings.



The Retail Segment represented 3% and 56% of total segment earnings in the
first quarters of 2004 and 2003, respectively. Retail Segment total assets were $821 million at March 31, 2004 and represented 18% of total consolidated assets.



Trust and Asset Management



The Trust and Asset Management Segment (TAM) provides trust, investment management, employee benefit recordkeeping and administration and brokerage services.
It also acts as an advisor and provides fund administration to the Vintage Mutual Funds and various public fund programs. These products are



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distributed nationally (i.e. Vintage Equity Fund is available through Charles Schwab, OneSource), regionally to institutional investors and corporations, and locally through the
BANKs locations.



TAM earnings for the first quarter of 2004 were
$573,000, a decrease of $156,000 or 21% from the same period in 2003. The decrease was primarily due to higher operating expenses net of lower income tax expense.



TAM non-interest income increased $36,000 for the three month period ended March 31, 2004 when compared to the same period in 2003 as
declines in trust and asset management revenues were essentially offset by improved brokerage commission income.



Operating expenses increased $288,000 in the first quarter of 2004 due to higher personnel costs. Partially offsetting this increase was an impairment charge incurred in
the first quarter of 2003 related to internal use software that was discontinued.



Income taxes declined $100,000 in the first quarter of 2004 when compared to the same period in 2003 due to lower pre-tax earnings.



The TAM Segment represented 8% and 6% of total segment earnings in the first quarters of 2004 and 2003, respectively. TAM Segment total assets were $17.9 million at March
31, 2004 and represented less than 1% of total consolidated assets.



Mortgage Banking



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



Mortgage incurred a loss of $272,000 in the first quarter of 2004, compared to income of
$2.0 million in the same period in 2003. The decrease was primarily due to lower non-interest income and net interest income that were partially offset by lower Provision and income tax expense.



Net interest income decreased $924,000 in the first quarter of 2004 compared to the same
quarter in 2003. This was primarily due to decreased interest income and fees on mortgage loans held for sale net of lower cost of funds allocations. Interest income declined due to lower average residential real estate loan volumes and yields, both
of which were impacted by declining mortgage rates and increased prepayments since the first quarter of 2003.



Non-interest income includes fees generated from the underwriting, originating and servicing of mortgage loans along with the gains realized from the sale of these loans, net of servicing right amortization and
impairment. Non-interest income for the first quarter of 2004 declined $3.1 million from the first quarter of 2003. Contributing to the $3.1 million decline was a $1.7 million mortgage servicing right impairment charge in the first quarter of 2004.
The rest of the decline was primarily volume driven as mortgage closings declined 52% to $98 million in the first quarter of 2004, from $205 million in the first quarter 2003. Of total first quarter 2004 closings, 56% were due to refinancing
compared to 82% a year ago. The decline in volume was expected as refinancing activity began to slow during the fourth quarter of 2003 and did not pick up again until March 2004.



The first quarter 2004 Provision decreased by $492,000 compared to the first quarter of 2003. The decrease in the Provision was primarily
attributable to lower specific loss estimates on certain individually reviewed loans, reduced allocations associated with loans that were sold in the Wisconsin Branch Sale and lower net charge-offs.



Operating expenses increased $205,000 in the first quarter of 2004 compared to same period in
2003. The increase was primarily due to higher personnel costs and premises and equipment costs.



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Income taxes decreased $1.5 million quarter-to-quarter due to lower pre-tax earnings.



The unpaid principal balance of mortgage loans serviced for others, including mortgage loans
held for sale, was $1.2 billion as of March 31, 2004. This compares to $1.1 billion as of March 31, 2003.



The Mortgage Segment represented a negative 4% and a positive 17% of total segment earnings in the first quarters of 2004 and 2003, respectively. Mortgage Segment total assets were $252 million at March 31, 2004 and
represented 5% of total consolidated assets.



BALANCE SHEET
REVIEW



Total assets were $4.6 billion at March 31, 2004, an increase of
$75.4 million or 2% from December 31, 2003. Total liabilities increased $64.8 million over the same period, while stockholders equity increased $10.6 million.



Total earning assets, including COLI, increased $67.4 million from December 31, 2003. Non-earning assets increased $8.0 million over the
same period. The increase in earning assets was primarily attributable to a $50.6 million increase in loans and an $8.0 million increase in loans held for sale. The increase in loans is due to growth in the commercial real estate and commercial loan
portfolios and is largely due to Branch Expansion. The increase in loans held for sale is due to a surge in mortgage activity late in the first quarter of 2004 as refinancing activity increased.



Total deposits increased $87.0 million from December 31, 2003 including a $63.8 million
increase in bank-issued deposits and a $23.2 million increase in brokered CDs. The increase in bank-issued deposits is attributable to a Company-wide initiative to attract deposits, especially transaction deposits, and the Branch Expansion. Total
borrowings decreased by $30.8 million over the same period. Other liabilities increased $8.6 million.



The stockholders equity increase was due to a rise in the unrealized value of investment securities available for sale and first quarter 2004 retained earnings.



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 Sheet, 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 liquidity and credit concentration risks, optimization of capital utilization, meeting the financial needs of its customers and fulfilling Community Reinvestment Act obligations in the
markets that it serves.



The Companys largest off-balance sheet
arrangement relates to Auto Loan Sales that occurred during the first quarter of 2003 and prior years. Structured as sales pursuant to Statement of Financial Accounting Standard (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 Accounting Standards Board Interpretation (FIN) 46
(Revised December 2003) Consolidation of Variable Interest Entities. As a result, the net carrying amount of the loans is removed from the consolidated balance sheet and certain retained residual interests are recorded. The
Companys



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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. Neither the investors nor the VIE have any other recourse to the Companys other assets for failure of automobile loan debtors to pay when due. The Company also retains the rights to service the loans that are sold.



As of March 31, 2004, the balance of automobile loans serviced and not
included on the Companys Consolidated Balance Sheet was $79.9 million. The carrying value of retained interests was $7.3 million. The carrying value of the retained interests is the maximum estimated exposure to loss of the retained residual
interests. See Note 5 of the Notes to Consolidated Financial Statements.



The
Company also 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 March 31, 2004, the unpaid principal balance of mortgage loans serviced for others was
$1.2 billion. These loans are not recorded on the Companys consolidated balance sheets. The Company, as of March 31, 2004, and in accordance with SFAS No 140, had recorded $11.4 million of capitalized mortgage servicing rights, less a $1.7
million impairment valuation allowance. See Note 4 of the Notes to Consolidated Financial Statements.



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 March 31, 2004, a liability in the amount of $319,000, representing the
value of the guarantee obligations associated with certain of the financial and standby letters of credit, has been recorded in accordance with FIN 45. This amount will be amortized into income over the life of the commitment. The notional amount of
all letters of credit, including those exempted from the scope of FIN 45, was $183 million. See Note 10 of the Notes to Consolidated Financial Statements.



The carrying value of mortgage loan commitments at March 31, 2004 was an asset of $724,000. This amount represents the fair value of those commitments marked-to-market in
accordance with SFAS 138, Accounting for Derivative Instruments and Hedging Activities. The total notional amount of mortgage loan commitments was $84 million at March 31, 2004. See Note 8 of the Notes to Consolidated Financial
Statements.



At March 31, 2004, the Company had extended $698 million in loan
commitments other than the mortgage loan commitments and letters of credit described above. This amount represented the notional amount of the commitment. No asset or liability has been recorded.



The Company has a number of non-marketable equity investments that have not been consolidated
in its financial statements. At March 31, 2004, these investments included $5.6 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 $1.8 million at some future date. The Company also has recorded investments of $4.3 million, $23.4 million, and $8.9 million, respectively, in stock of the Federal Reserve Bank, FHLB and
preferred stock of Freddie Mac. These investments are recorded at amortized historical cost, with income recorded when dividends are declared. Other investments, comprised of various affordable housing tax credit projects (AHTCP),
totaled approximately $670,000 at March 31, 2004. Losses are limited to the remaining investment and there are no additional funding commitments on the AHTCPs. 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. The Company also holds $1.2 million
in a common security investment in AMCORE Capital Trust I (Trust), a statutory business trust, to which the Company has $41.2 million in long-term debt outstanding. The Trust, in addition to the $1.2 million in common securities issued
to the Company, issued $40.0 million in preferred securities. The $40.0 million in preferred securities were issued to non-affiliated investors in 1997 and are redeemable beginning in 2007. The BANK acquired $15.0



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million in preferred securities from one of the investors in 2002. Prior to the current quarter, the Trust was consolidated with the Company and the Company
reflected $25.0 million in long-term debt outstanding, which was treated as Tier 1 capital for regulatory purposes. Pursuant to FIN 46, and beginning with the first quarter of 2004, the Trust has been de-consolidated. As a result, the Company now
reflects its $1.2 million common security investment on the equity method. The $15.0 million preferred securities are included in the BANKs available for sale investment portfolio. The Company now reports the entire $41.2 million as
outstanding long-term debt. Despite the adoption of FIN 46 in the first quarter of 2004, there is no change in the amount that qualifies as Tier 1 Capital for regulatory purposes.



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. The total assets managed or administered by the Company at March 31, 2004, excluding the BANKs investment portfolio, were $4.3 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 quarter of 2004, the Company entered into 2 operating lease agreements. There are no residual value guarantees on these leases. During the quarter, the Company
terminated two fair value hedges of FHLB borrowings with a combined notional amount of $74.0 million. Other than these transactions, there were no material changes in the Companys contractual obligations since the end of the latest calendar
year. Amounts as of December 31, 2003 are listed in the table below.



|                          |  |                        |         |                  |   |           |  |           |        |                   |   |        |  |   |       
|------------------------- |  | ---------------------- | ------- | ---------------- | - | --------- |  | --------- | ------ | ----------------- | - | ------ |  | - | ------
|(in thousands)            |  | Payments due by period
|Contractual Obligations   |  | Total                  |         | Less Than 1 Year |   | 1-3 Years |  | 3-5 Years |        | More Than 5 Years
|Long-Term Debt            |  | $                      | 184,610 |                  | $ | 3         |  | $         | 51,908 |                   | $ | 79,683 |  | $ | 53,016
|Capital Lease Obligations |  |                        | 3,121   |                  |   | 163       |  |           | 332    |                   |   | 346    |  |   | 2,280 
|Operating Leases          |  |                        | 17,437  |                  |   | 2,413     |  |           | 3,853  |                   |   | 2,802  |  |   | 8,369 
|Purchase Obligations      |  |                        | 5,630   |                  |   | 5,630     |  |           |       |                   |   |       |  |   |      
|                          |  |                        |         |                  |   |           |  |           |        |                   |   |        |  |   |       
|Total                     |  | $                      | 210,798 |                  | $ | 8,209     |  | $         | 56,093 |                   | $ | 82,831 |  | $ | 63,665
|                          |  |                        |         |                  |   |           |  |           |        |                   |   |        |  |   |       



See Notes 6, 7 and 8 of the Notes to
Consolidated Financial Statements and Note 5 to the Notes to the Consolidated Financial Statements included in the Form 10-K Annual Report for the year ended December 31, 2003.



ASSET QUALITY REVIEW AND CREDIT RISK MANAGEMENT



AMCOREs credit risk is centered in its loan portfolio, which on March 31, 2004 totaled $3.0 billion, or 70% of earning assets
including COLI. 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 its $120.2 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



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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 $43.5 million at March 31, 2004, compared to $42.1 million at December 31, 2003, an increase of $1.4 million or 3%. The increase included a $1.7 million increase in specific loss estimates on certain individually reviewed loans
and a $2.3 million increase for statistical loss estimates on loan groups or pools based upon historical loss experience. Partially offsetting these increases was a $2.7 million decline for loss estimates based upon reduced concerns over loan
concentrations, improved credit quality due to expansion of workout and collection staffs that enabled the Company to address deteriorating credits more quickly before further losses in value, improvement in the overall and local economies and lower
non-accrual loans and delinquencies.



As of March 31, 2004, the Allowance as a
percent of total loans and of non-accrual loans was 1.43% and 149%, respectively. These compare to the same ratios at December 31, 2003 of 1.41% and 133%. Net charge-offs were $3.3 million for the first three months of 2004 versus $6.8 million for
the first three months of 2003. These represented 0.44% and 0.95% of average loans, respectively, on an annualized basis. AMCOREs management believes that the Allowance coverage is adequate.



An analysis of the Allowance is shown in Table 3.



Non-performing Assets



Non-performing assets consist of non-accrual loans, loans 90 days past due and still accruing, other real estate owned and other foreclosed
assets. Non-performing assets totaled $39.8 million as of March 31, 2004, a decline of $1.6 million or 4% from $41.4 million at December 31, 2003. The $1.6 million decrease consisted of a $2.4 million decrease in non-accrual loans and an $1.1
million decrease in other foreclosed assets. These were partly offset by a $1.1 million increase in loans 90 days past due and still accruing and a $790,000 increase in other real estate owned. Total non-performing assets represented 0.86% and 0.91%
of total assets at March 31, 2004 and December 31, 2003, respectively. Subsequent to the end of the first quarter of 2004, the Company resolved without loss its largest non-performing loan, removing approximately $6.0 million from its non-accrual
loan totals.



An analysis of non-performing assets is shown in Table 3.



LIQUIDITY AND CAPITAL MANAGEMENT



Liquidity Management



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. These commitments 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.



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 (FED funds), FHLB advances, repurchase agreements, commercial paper and back-up lines of credit, the sale or securitization of
loans, and access to other capital markets.



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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. Dividends from subsidiaries through March 31, 2004 amounted to $5.0 million.



Funding of loans is the most significant liquidity need, representing 66% of total assets as
of March 31, 2004. Since December 31, 2003, loans increased $50.6 million. Loans held for sale, which represents mortgage origination fundings awaiting delivery to the secondary market, increased $8.0 million. During this same time period,
bank-issued deposits increased $63.8 million. The increases in loans and bank-issued deposits were due to increases resulting from the Branch Expansion and same-branch growth. The increase in loans held for sale reflects increased refinancing
activity due to a decline in mortgage interest rates late in the first quarter of 2004. Overall, liquidity improved modestly during the first three months of 2004, as non-core funding, which includes borrowings and brokered CDs, declined $7.6
million.



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 loan growth and the total estimated $58 million capital investment. This reflects the Companys
strategy to move into new markets where business density is greatest and where revenues and a profitable book of business can be developed over a shorter period of time. Once this is accomplished, a more permanent full-service site is sought where
the Company expects deposit generation to mitigate the liquidity pressure inherent in the early phases of the strategy.



Notwithstanding the funding requirements posed by the Branch Expansion, the Company is confident of its ability to meet and manage its short and long-term liquidity
needs. As of March 31, 2004 available sources of liquidity included $151 million of FED funds lines, unused collateral sufficient to support $332 million in FED discount window advances, $280 million of unpledged debt investment securities, $44
million of unused commercial paper and backup line of credit borrowings and $8 million of FHLB advances. 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 March 31, 2004 was $461 million, also remains an attractive source of liquidity through additional Auto Loan Sales. At March 31, 2004, potential uses of liquidity included $698 million in commitments to
extend credit, $84 million in residential mortgage commitments primarily for sale to the secondary market, and $183 million in letters of credit. At December 31, 2003, these amounts were $635 million, $42 million and $190 million, respectively.



Capital Management



Total stockholders equity at March 31, 2004, was $386.2 million, an increase of $10.6
million or 3% from December 31, 2003. The increase in stockholders equity was due to an increase in the unrealized value of investment securities available for sale and first quarter 2004 retained earnings. Other comprehensive income increased
primarily due to changes in the unrealized value of investment securities available for sale. See Note 8 of the Notes to Consolidated Financial Statements. AMCORE paid dividends of $0.17 per share in the first quarter of 2004 compared to $0.16 per
share in the first quarter of 2003.



AMCORE has outstanding $41.2 million of
capital securities through the Trust . Of the $41.2 million, $25.0 million qualifies as Tier 1 capital for regulatory capital purposes, which is the $41.2 million reduced by the $1.2 million of common equity securities owned by the Company and the
$15.0 million of preferred securities that were acquired by the BANK in 2002. The classification of these capital securities as Tier 1 Capital, pending a decision by regulatory authorities, may be impacted by the de-consolidation of the Trust
pursuant to FIN 46. Any such disqualification is not expected to have a material impact on the Companys capital adequacy.



AMCOREs ratio of risk-based capital at 12.03%, its Tier 1 capital at 10.79% and its leverage ratio at 8.40%, all significantly exceed the regulatory minimums (as
the following table indicates), as of March 31, 2004. The BANK, whose ratios are not presented below, is considered a well-capitalized institution based on regulatory guidelines.



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(dollars in thousands)



|                                         |  |                |           |       |                   |   |        |                |           |  |       |        |  |       |           |  |       |  
|---------------------------------------- |  | -------------- | --------- | ----- | ----------------- | - | ------ | -------------- | --------- |  | ----- | ------ |  | ----- | --------- |  | ----- | -
|                                         |  | March 31, 2004 |           |       | December 31, 2003 |   |        | March 31, 2003 |          
|                                         |  | Amount         |           | Ratio |                   |   | Amount |                | Ratio     |  |       | Amount |  | Ratio |          
|Total Capital (to Risk Weighted Assets)  |  | $              | 424,863   |       | 12.03             | % |        | $              | 417,580   |  | 11.76 | %      |  | $     | 390,215   |  | 11.46 | %
|Total Capital Minimum                    |  |                | 282,534   |       | 8.00              | % |        |                | 284,003   |  | 8.00  | %      |  |       | 272,389   |  | 8.00  | %
|                                         |  |                |           |       |                   |   |        |                |           |  |       |        |  |       |           |  |       |  
|Amount in Excess of Regulatory Minimum   |  | $              | 142,329   |       | 4.03              | % |        | $              | 133,577   |  | 3.76  | %      |  | $     | 117,826   |  | 3.46  | %
|                                         |  |                |           |       |                   |   |        |                |           |  |       |        |  |       |           |  |       |  
|Tier 1 Capital (to Risk Weighted Assets) |  | $              | 381,053   |       | 10.79             | % |        | $              | 375,330   |  | 10.57 | %      |  | $     | 350,317   |  | 10.29 | %
|Tier 1 Capital Minimum                   |  |                | 141,267   |       | 4.00              | % |        |                | 142,001   |  | 4.00  | %      |  |       | 136,195   |  | 4.00  | %
|                                         |  |                |           |       |                   |   |        |                |           |  |       |        |  |       |           |  |       |  
|Amount in Excess of Regulatory Minimum   |  | $              | 239,786   |       | 6.79              | % |        | $              | 233,329   |  | 6.57  | %      |  | $     | 214,122   |  | 6.29  | %
|                                         |  |                |           |       |                   |   |        |                |           |  |       |        |  |       |           |  |       |  
|Tier 1 Capital (to Average Assets)       |  | $              | 381,053   |       | 8.40              | % |        | $              | 375,330   |  | 8.49  | %      |  | $     | 350,317   |  | 7.97  | %
|Tier 1 Capital Minimum                   |  |                | 181,474   |       | 4.00              | % |        |                | 176,811   |  | 4.00  | %      |  |       | 175,846   |  | 4.00  | %
|                                         |  |                |           |       |                   |   |        |                |           |  |       |        |  |       |           |  |       |  
|Amount in Excess of Regulatory Minimum   |  | $              | 199,579   |       | 4.40              | % |        | $              | 198,519   |  | 4.49  | %      |  | $     | 174,471   |  | 3.97  | %
|                                         |  |                |           |       |                   |   |        |                |           |  |       |        |  |       |           |  |       |  
|Risk adjusted assets                     |  | $              | 3,531,679 |       |                   |   |        | $              | 3,550,035 |  |       |        |  | $     | 3,404,363 |  |       |  
|                                         |  |                |           |       |                   |   |        |                |           |  |       |        |  |       |           |  |       |  
|Average assets                           |  | $              | 4,536,856 |       |                   |   |        | $              | 4,420,287 |  |       |        |  | $     | 4,396,572 |  |       |  
|                                         |  |                |           |       |                   |   |        |                |           |  |       |        |  |       |           |  |       |  



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TABLE 1

ANALYSIS OF NET INTEREST INCOME AND AVERAGE BALANCE SHEET



|                                            |  |                                      |           |   |          |   |             |  |       |                |  |   |           |   |             |   |        |  |      |  
|------------------------------------------- |  | ------------------------------------ | --------- | - | -------- | - | ----------- |  | ----- | -------------- |  | - | --------- | - | ----------- | - | ------ |  | ---- | -
|                                            |  | For the Three Months ended March 31, |          
|                                            |  | 2004                                 |           |   | 2003     |  
|                                            |  | AverageBalance                       |           |   | Interest |   | AverageRate |  |       | AverageBalance |  |   | Interest  |   | AverageRate |  
|                                            |  | (dollars in thousands)               |          
|Assets:                                     |  |                                      |           |   |          |   |             |  |       |                |  |   |           |   |             |   |        |  |      |  
|Taxable securities                          |  | $                                    | 1,011,486 |   |          | $ | 10,917      |  | 4.32  | %              |  | $ | 899,941   |   |             | $ | 10,711 |  | 4.76 | %
|Tax-exempt securities(1)                    |  |                                      | 140,568   |   |          |   | 2,618       |  | 7.45  | %              |  |   | 208,393   |   |             |   | 3,877  |  | 7.44 | %
|                                            |  |                                      |           |   |          |   |             |  |       |                |  |   |           |   |             |   |        |  |      |  
|Total Securities(2)                         |  | $                                    | 1,152,054 |   |          | $ | 13,535      |  | 4.70  | %              |  | $ | 1,108,334 |   |             | $ | 14,588 |  | 5.27 | %
|Short-term investments                      |  |                                      | 7,697     |   |          |   | 19          |  | 0.99  | %              |  |   | 8,415     |   |             |   | 22     |  | 1.06 | %
|Loans held for sale(3)                      |  |                                      | 25,969    |   |          |   | 714         |  | 11.00 | %              |  |   | 53,843    |   |             |   | 1,173  |  | 8.71 | %
|Commercial                                  |  |                                      | 731,230   |   |          |   | 10,159      |  | 5.58  | %              |  |   | 759,934   |   |             |   | 10,971 |  | 5.85 | %
|Commercial real estate                      |  |                                      | 1,369,631 |   |          |   | 18,185      |  | 5.34  | %              |  |   | 1,115,425 |   |             |   | 16,421 |  | 5.97 | %
|Residential real estate                     |  |                                      | 372,602   |   |          |   | 5,384       |  | 5.79  | %              |  |   | 440,192   |   |             |   | 7,163  |  | 6.54 | %
|Consumer                                    |  |                                      | 550,211   |   |          |   | 9,396       |  | 6.87  | %              |  |   | 586,261   |   |             |   | 10,942 |  | 7.57 | %
|                                            |  |                                      |           |   |          |   |             |  |       |                |  |   |           |   |             |   |        |  |      |  
|Total loans(1) (4)                          |  | $                                    | 3,023,674 |   |          | $ | 43,124      |  | 5.73  | %              |  | $ | 2,901,812 |   |             | $ | 45,497 |  | 6.35 | %
|                                            |  |                                      |           |   |          |   |             |  |       |                |  |   |           |   |             |   |        |  |      |  
|Total interest-earning assets               |  | $                                    | 4,209,394 |   |          | $ | 57,392      |  | 5.47  | %              |  | $ | 4,072,404 |   |             | $ | 61,280 |  | 6.07 | %
|Allowance for loan losses                   |  |                                      | (43,397   | ) |          |   |             |  |       |                |  |   | (35,001   | ) |             |   |        |  |      |  
|Non-interest-earning assets                 |  |                                      | 399,012   |   |          |   |             |  |       |                |  |   | 403,172   |   |             |   |        |  |      |  
|                                            |  |                                      |           |   |          |   |             |  |       |                |  |   |           |   |             |   |        |  |      |  
|Total assets                                |  | $                                    | 4,565,009 |   |          |   |             |  |       |                |  | $ | 4,440,575 |   |             |   |        |  |      |  
|                                            |  |                                      |           |   |          |   |             |  |       |                |  |   |           |   |             |   |        |  |      |  
|Liabilities and Stockholders Equity:       |  |                                      |           |   |          |   |             |  |       |                |  |   |           |   |             |   |        |  |      |  
|Interest-bearing demand & savings deposits  |  | $                                    | 1,454,893 |   |          | $ | 3,277       |  | 0.91  | %              |  | $ | 1,124,422 |   |             | $ | 2,400  |  | 0.87 | %
|Time deposits                               |  |                                      | 1,090,754 |   |          |   | 7,323       |  | 2.70  | %              |  |   | 1,246,212 |   |             |   | 11,749 |  | 3.82 | %
|                                            |  |                                      |           |   |          |   |             |  |       |                |  |   |           |   |             |   |        |  |      |  
|Total Bank issued interest-bearing deposits |  | $                                    | 2,545,647 |   |          | $ | 10,600      |  | 1.67  | %              |  | $ | 2,370,634 |   |             | $ | 14,149 |  | 2.42 | %
|Wholesale deposits                          |  |                                      | 447,091   |   |          |   | 3,344       |  | 3.01  | %              |  |   | 553,767   |   |             |   | 5,134  |  | 3.76 | %
|Short-term borrowings                       |  |                                      | 524,159   |   |          |   | 2,728       |  | 2.09  | %              |  |   | 514,470   |   |             |   | 3,172  |  | 2.50 | %
|Long-term borrowings                        |  |                                      | 183,515   |   |          |   | 2,395       |  | 5.25  | %              |  |   | 184,835   |   |             |   | 2,782  |  | 6.10 | %
|                                            |  |                                      |           |   |          |   |             |  |       |                |  |   |           |   |             |   |        |  |      |  
|Total interest-bearing liabilities          |  | $                                    | 3,700,412 |   |          | $ | 19,067      |  | 2.07  | %              |  | $ | 3,623,706 |   |             | $ | 25,237 |  | 2.82 | %
|Non-interest bearing deposits               |  |                                      | 420,742   |   |          |   |             |  |       |                |  |   | 370,132   |   |             |   |        |  |      |  
|Other liabilities                           |  |                                      | 60,077    |   |          |   |             |  |       |                |  |   | 84,715    |   |             |   |        |  |      |  
|Realized Stockholders Equity               |  |                                      | 372,055   |   |          |   |             |  |       |                |  |   | 340,073   |   |             |   |        |  |      |  
|Other Comprehensive Income                  |  |                                      | 11,723    |   |          |   |             |  |       |                |  |   | 21,949    |   |             |   |        |  |      |  
|                                            |  |                                      |           |   |          |   |             |  |       |                |  |   |           |   |             |   |        |  |      |  
|Total Liabilities & Stockholders Equity    |  | $                                    | 4,565,009 |   |          |   |             |  |       |                |  | $ | 4,440,575 |   |             |   |        |  |      |  
|                                            |  |                                      |           |   |          |   |             |  |       |                |  |   |           |   |             |   |        |  |      |  
|                                            |  |                                      |           |   |          |   |             |  |       |                |  |   |           |   |             |   |        |  |      |  
|Net Interest Income (FTE)                   |  |                                      |           |   |          | $ | 38,325      |  |       |                |  |   |           |   |             | $ | 36,043 |  |      |  
|                                            |  |                                      |           |   |          |   |             |  |       |                |  |   |           |   |             |   |        |  |      |  
|Net Interest Spread (FTE)                   |  |                                      |           |   |          |   |             |  | 3.40  | %              |  |   |           |   |             |   |        |  | 3.25 | %
|                                            |  |                                      |           |   |          |   |             |  |       |                |  |   |           |   |             |   |        |  |      |  
|Interest Rate Margin (FTE)                  |  |                                      |           |   |          |   |             |  | 3.65  | %              |  |   |           |   |             |   |        |  | 3.56 | %
|                                            |  |                                      |           |   |          |   |             |  |       |                |  |   |           |   |             |   |        |  |      |  



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TABLE 2

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



|                                                |  |                                               |        |   |                             |   |        |   |  |   |        |  
|----------------------------------------------- |  | --------------------------------------------- | ------ | - | --------------------------- | - | ------ | - |  | - | ------ | -
|                                                |  | For the Three Months endedMarch 31, 2004/2003 |       
|                                                |  | Increase/(Decrease)Due to Change in           |        |   | Total NetIncrease(Decrease) |  
|                                                |  | AverageVolume                                 |        |   | AverageRate                 |   |       
|                                                |  | (in thousands)                                |       
|Interest Income:                                |  |                                               |        |   |                             |   |        |   |  |   |        |  
|Taxable securities                              |  | $                                             | 1,257  |   |                             | $ | (1,051 | ) |  | $ | 206    |  
|Tax-exempt securities(1)                        |  |                                               | (1,263 | ) |                             |   | 4      |   |  |   | (1,259 | )
|                                                |  |                                               |        |   |                             |   |        |   |  |   |        |  
|Total Securities(2)                             |  | $                                             | 559    |   |                             | $ | (1,612 | ) |  | $ | (1,053 | )
|Short-term investments                          |  |                                               | 2      |   |                             |   | (5     | ) |  |   | (3     | )
|Loans held for sale(3)                          |  |                                               | (713   | ) |                             |   | 254    |   |  |   | (459   | )
|Commercial                                      |  |                                               | (368   | ) |                             |   | (444   | ) |  |   | (812   | )
|Commercial real estate                          |  |                                               | 3,595  |   |                             |   | (1,831 | ) |  |   | 1,764  |  
|Residential real estate                         |  |                                               | (1,020 | ) |                             |   | (759   | ) |  |   | (1,779 | )
|Consumer                                        |  |                                               | (617   | ) |                             |   | (929   | ) |  |   | (1,546 | )
|                                                |  |                                               |        |   |                             |   |        |   |  |   |        |  
|Total loans(1) (4)                              |  |                                               | 1,969  |   |                             |   | (4,342 | ) |  |   | (2,373 | )
|                                                |  |                                               |        |   |                             |   |        |   |  |   |        |  
|Total Interest-Earning Assets                   |  | $                                             | 2,105  |   |                             | $ | (5,993 | ) |  | $ | (3,888 | )
|                                                |  |                                               |        |   |                             |   |        |   |  |   |        |  
|Interest Expense:                               |  |                                               |        |   |                             |   |        |   |  |   |        |  
|Interest-bearing demand and savings deposits    |  | $                                             | 757    |   |                             | $ | 120    |   |  | $ | 877    |  
|Time deposits                                   |  |                                               | (1,319 | ) |                             |   | (3,107 | ) |  |   | (4,426 | )
|                                                |  |                                               |        |   |                             |   |        |   |  |   |        |  
|Total Bank issued interest-bearing deposits     |  |                                               | 1,013  |   |                             |   | (4,562 | ) |  |   | (3,549 | )
|Wholesale deposits                              |  |                                               | (878   | ) |                             |   | (912   | ) |  |   | (1,790 | )
|Short-term borrowings                           |  |                                               | 62     |   |                             |   | (507   | ) |  |   | (445   | )
|Long-term borrowings                            |  |                                               | (19    | ) |                             |   | (368   | ) |  |   | (387   | )
|                                                |  |                                               |        |   |                             |   |        |   |  |   |        |  
|Total Interest-Bearing Liabilities              |  | $                                             | 542    |   |                             | $ | (6,712 | ) |  | $ | (6,170 | )
|                                                |  |                                               |        |   |                             |   |        |   |  |   |        |  
|Net Interest Margin / Net Interest Income (FTE) |  | $                                             | 1,563  |   |                             | $ | 719    |   |  | $ | 2,282  |  
|                                                |  |                                               |        |   |                             |   |        |   |  |   |        |  



The above table 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 and due to the extra day in 2004 due to leap year have been allocated to volume and rate changes in proportion to the relationship of the
absolute dollar amounts of the change in each.



|(1) | The interest on tax-exempt securities and tax-exempt loans is calculated on a tax equivalent basis assuming a federal tax rate of 35%.
|--- | --------------------------------------------------------------------------------------------------------------------------------------



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



|(3) | The yield-related fees recognized from the origination of loans held for sale are in addition to the interest earned on the loans during the period in which they are
warehoused for sale as shown above.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | The balances of nonaccrual loans are included in average loans outstanding. Interest on loans includes yield related loan fees of $679,000 and $687,000 for 2004 and
2003 respectively.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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TABLE 3

ASSET QUALITY



The components of
non-performing loans and foreclosed assets at March 31, 2004 and December 31, 2003 were as follows:



|                                                  |  |                |        |                  |   |       
|------------------------------------------------- |  | -------------- | ------ | ---------------- | - | ------
|                                                  |  | March 31,2004  |        | December 31,2003
|                                                  |  | (in thousands)
|Impaired loans:                                   |  |                |       
|Non-accrual loans                                 |  |                |        |                  |   |       
|Commercial                                        |  | $              | 4,993  |                  | $ | 3,154 
|Real estate                                       |  |                | 13,551 |                  |   | 15,676
|Other non-performing:                             |  |                |        |                  |   |       
|Non-accrual loans(1)                              |  |                | 10,695 |                  |   | 12,841
|Loans 90 days or more past due and still accruing |  |                | 4,401  |                  |   | 3,304 
|                                                  |  |                |        |                  |   |       
|Total non-performing loans                        |  | $              | 33,640 |                  | $ | 34,975
|                                                  |  |                |        |                  |   |       
|Foreclosed assets:                                |  |                |        |                  |   |       
|Real estate                                       |  |                | 5,223  |                  |   | 4,433 
|Other                                             |  |                | 887    |                  |   | 1,989 
|                                                  |  |                |        |                  |   |       
|Total foreclosed assets                           |  | $              | 6,110  |                  | $ | 6,422 
|                                                  |  |                |        |                  |   |       
|Total non-performing assets                       |  | $              | 39,750 |                  | $ | 41,397
|                                                  |  |                |        |                  |   |       



|(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 March 31, 2004 and 2003 is
presented below:



|                                                                                             |  |                                     |        |   |      |   |        |  
|-------------------------------------------------------------------------------------------- |  | ----------------------------------- | ------ | - | ---- | - | ------ | -
|                                                                                             |  | For the Three MonthsEnded March 31, |       
|                                                                                             |  | 2004                                |        |   | 2003 |  
|                                                                                             |  | ($ in thousands)                    |       
|Balance at beginning of period                                                               |  | $                                   | 42,115 |   |      | $ | 35,214 |  
|Charge-Offs:                                                                                 |  |                                     |        |   |      |   |        |  
|Commercial, financial and agricultural                                                       |  |                                     | 1,875  |   |      |   | 4,576  |  
|Real estate                                                                                  |  |                                     | 939    |   |      |   | 946    |  
|Installment and consumer                                                                     |  |                                     | 2,044  |   |      |   | 1,712  |  
|Direct leases                                                                                |  |                                     | 4      |   |      |   | 93     |  
|                                                                                             |  |                                     |        |   |      |   |        |  
|                                                                                             |  |                                     | 4,862  |   |      |   | 7,327  |  
|Recoveries:                                                                                  |  |                                     |        |   |      |   |        |  
|Commercial, financial and agricultural                                                       |  |                                     | 996    |   |      |   | 116    |  
|Real estate                                                                                  |  |                                     | 21     |   |      |   | 181    |  
|Installment and consumer                                                                     |  |                                     | 528    |   |      |   | 248    |  
|Direct leases                                                                                |  |                                     | 2      |   |      |   |       |  
|                                                                                             |  |                                     |        |   |      |   |        |  
|                                                                                             |  |                                     | 1,547  |   |      |   | 545    |  
|Net Charge-Offs                                                                              |  |                                     | 3,315  |   |      |   | 6,782  |  
|Provision charged to expense                                                                 |  |                                     | 4,675  |   |      |   | 12,575 |  
|Reductions due to sale of loans                                                              |  |                                     |       |   |      |   | (1,407 | )
|                                                                                             |  |                                     |        |   |      |   |        |  
|Balance at end of period                                                                     |  | $                                   | 43,475 |   |      | $ | 39,600 |  
|                                                                                             |  |                                     |        |   |      |   |        |  
|Ratio of net-charge-offs during the period to average loans outstanding during the period(1) |  |                                     | 0.44   | % |      |   | 0.95   | %
|                                                                                             |  |                                     |        |   |      |   |        |  



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



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Table 4



AMCORE Branch Expansion Plans as of March 31, 2004



|                                |  |      |   |  |            |   |  |          |   |  |                 |   |  |                |   
|------------------------------- |  | ---- | - |  | ---------- | - |  | -------- | - |  | --------------- | - |  | -------------- | --
|Strategy                        |  | LBO* |   |  | Full Serv. |   |  | In-store |   |  | BranchExpansion |   |  | TotalLocations |   
|2001                            |  |      |   |  |            |   |  |          |   |  |                 |   |  | 64             | **
|- Sold branches                 |  |      |   |  |            |   |  |          |   |  |                 |   |  | (7             | ) 
|+ New branches                  |  | 1    |   |  | 1          |   |  | 0        |   |  | 2               |   |  | 2              |   
|- Closed, moved to new facility |  | 0    |   |  | 0          |   |  | 0        |   |  | 0               |   |  | 0              |   
|                                |  |      |   |  |            |   |  |          |   |  |                 |   |  |                |   
|Cumulative total                |  | 1    |   |  | 1          |   |  | 0        |   |  | 2               |   |  | 59             |   
|2002                            |  |      |   |  |            |   |  |          |   |  |                 |   |  |                |   
|+ New branches                  |  | 4    |   |  | 3          |   |  | 0        |   |  | 7               |   |  | 7              |   
|- Closed, moved to new facility |  | (1   | ) |  | (1         | ) |  | 0        |   |  | (2              | ) |  | (2             | ) 
|                                |  |      |   |  |            |   |  |          |   |  |                 |   |  |                |   
|Cumulative total                |  | 4    |   |  | 3          |   |  | 0        |   |  | 7               |   |  | 64             |   
|2003                            |  |      |   |  |            |   |  |          |   |  |                 |   |  |                |   
|- Sold branches                 |  |      |   |  |            |   |  |          |   |  |                 |   |  | (6             | ) 
|- Closed in-store               |  |      |   |  |            |   |  |          |   |  |                 |   |  | (1             | ) 
|+ New branches                  |  | 4    |   |  | 7          |   |  | 0        |   |  | 11              |   |  | 11             |   
|- Closed, moved to new facility |  | (1   | ) |  | (1         | ) |  | (2       | ) |  | (4              | ) |  | (4             | ) 
|                                |  |      |   |  |            |   |  |          |   |  |                 |   |  |                |   
|Cumulative total                |  | 7    |   |  | 9          |   |  | (2       | ) |  | 14              |   |  | 64             |   
|2004 Projected                  |  |      |   |  |            |   |  |          |   |  |                 |   |  |                |   
|+ New branches                  |  | 2    |   |  | 8          |   |  | 0        |   |  | 10              |   |  | 10             |   
|- Closed, moved to new facility |  | (4   | ) |  | 0          |   |  | (2       | ) |  | (6              | ) |  | (6             | ) 
|                                |  |      |   |  |            |   |  |          |   |  |                 |   |  |                |   
|Cumulative total                |  | 5    |   |  | 17         |   |  | (4       | ) |  | 18              |   |  | 68             |   
|2005 Projected                  |  |      |   |  |            |   |  |          |   |  |                 |   |  |                |   
|+ New branches                  |  | 2    |   |  | 7          |   |  | 0        |   |  | 9               |   |  | 9              |   
|- Closed, moved to new facility |  | (3   | ) |  | 0          |   |  | 0        |   |  | (3              | ) |  | (3             | ) 
|                                |  |      |   |  |            |   |  |          |   |  |                 |   |  |                |   
|Cumulative total                |  | 4    |   |  | 24         |   |  | (4       | ) |  | 24              |   |  | 74             |   
|2006 Projected                  |  |      |   |  |            |   |  |          |   |  |                 |   |  |                |   
|+ New branches                  |  | 0    |   |  | 1          |   |  | 0        |   |  | 1               |   |  | 1              |   
|- Closed, moved to new facility |  | (1   | ) |  | 0          |   |  | 0        |   |  | (1              | ) |  | (1             | ) 
|                                |  |      |   |  |            |   |  |          |   |  |                 |   |  |                |   
|Cumulative total                |  | 3    |   |  | 25         |   |  | (4       | ) |  | 24              |   |  | 74             |   

---

|* | LBO is a limited branch office.
|- | -------------------------------



|** | Includes asset management location in Des Moines
|-- | ------------------------------------------------



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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 interest 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. AMCOREs net interest 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, 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.



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 instruments to maximize net interest income while maintaining acceptable levels of risk to changes in market interest rates. Interest rate sensitivity analysis is
performed monthly using various simulations with an asset/liability modeling system. These analyses are reviewed by the Asset and Liability Committee (ALCO), whose actions attempt to minimize any sudden or sustained negative impact that
interest rate movements may have on net interest income. ALCO reviews the impact of liquidity, loan and deposit pricing compared to its competition, 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 increase in net interest income for the twelve-month period beginning April 1, 2004 would be approximately $1.5 million or 0.97% of
base forecasted net interest income. This analysis assumes no growth in assets or liabilities and replacement of maturing instruments with like-kind instruments. At the end of 2003, comparable assumptions would have resulted in a potential decrease
in 2004 net interest income of $764,000 or -0.48%. Thus, AMCORE has moved from a earnings at risk position in a rising-rate scenario to an earnings opportunity since the end of 2003 as the Company has moved from a liability sensitive to an asset
sensitive position in a rising rate climate.



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 net interest income for the twelve-month period beginning April 1, 2004 of approximately $8.6 million or -5.62% of base
forecasted net interest income. The same assumptions at the end of 2003 would have resulted in a potential decrease in net interest income of $7.1 million or -4.48%. AMCOREs sensitivity to declining interest rates has increased since the end
of 2003. AMCORE continues to be sensitive to compression as rates on most earning assets would be adversely affected by the full 100 basis point decline, whereas many interest paying liabilities may already be paying less than 1% and thus cannot
decline the full 100 basis points. Other factors include the negative convexity of the mortgage-backed products and the large volume of floating rate commercial loans.



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 interest income can be significantly impacted by a variety of external factors, such as those previously noted, and by the impact of the growth of the Company. 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 interest income, as well as maximize
potential positive impacts such movements might have.



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A comprehensive qualitative and quantitative analysis regarding market risk was disclosed in the Companys December
31, 2003 Form 10-K.



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##### Table of Contents

|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.



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##### Table of Contents

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. 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 2. | Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities
|------- | --------------------------------------------------------------------------------



The following table presents information relating to all Company repurchases of common stock during the first quarter of 2004:



Issuer Purchases of Equity Securities



|                      |  |                                |  |                                |       |                                                                            |   |                                                                                                   |  
|--------------------- |  | ------------------------------ |  | ------------------------------ | ----- | -------------------------------------------------------------------------- | - | ------------------------------------------------------------------------------------------------- | -
|Period                |  | (a) Total # of SharesPurchased |  | (b) AveragePrice Paid perShare |       | (c) Total # ofSharesPurchased asPart of PubliclyAnnounced Plansor Programs |   | (d) Maximum # (orApprox. DollarValue) of Sharesthat May Yet BePurchased Underthe Plans orPrograms
|January 1 - 31, 2004  |  | 1,376                          |  | $                              | 22.12 |                                                                            | 0 |                                                                                                   | 0
|February 1 - 29, 2004 |  | 94,293                         |  |                                | 28.64 |                                                                            | 0 |                                                                                                   | 0
|March 1 - 31, 2004    |  | 163,984                        |  |                                | 29.59 |                                                                            | 0 |                                                                                                   | 0
|                      |  |                                |  |                                |       |                                                                            |   |                                                                                                   |  
|Total                 |  | 259,653                        |  |                                | 29.21 |                                                                            | 0 |                                                                                                   | 0
|                      |  |                                |  |                                |       |                                                                            |   |                                                                                                   |  



The Company does not have a formally
announced Repurchase Program in place at this time, however, the Company does repurchase shares in open-market transactions in accordance with Exchange Act Rule 10b-18 through a limited group of brokers. These repurchases are used to replenish the
Companys Treasury Stock for re-issuances related to stock options and other employee benefit plans. Also included in the repurchased shares above are direct repurchases from participants related to the administration of the AMCORE Financial
Stock Option Advantage Plan.



|ITEM 6. | Exhibits and Reports on Form 8-K
|------- | --------------------------------



|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) 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  |  | Amendment to Loan Agreement with M & I Marshall and Ilsley Bank dated April 30, 2004.                                                                                                                                                                                                                                                                                                                                                                                                        
|      | 
|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.                                                                                                                                                                                                                                                                                                                                      



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|     |  |                                                                                                                                                
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|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.                 
|     | 
|(b)  |  | A report on Form 8-K, dated January 21, 2004, was filed concerning the Companys results of operations for the quarter ended December 31, 2003.



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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: May 7, 2004 |  |  |  |                       
|                  |  |  |  |                       
|                  |  |  |  |                        |  | By: |  | /s/    JOHN R. HECHT                                              
|                  |  |  |  |                        |  |     |  |                                                                   
|                  |  |  |  |                        |  |     |  | John R. Hecht Executive Vice President and Chief Financial Officer



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EXHIBIT INDEX



|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) 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  |  | Amendment to Loan Agreement with M & I Marshall and Ilsley Bank dated April 30, 2004.                                                                                                                                                                                                                                                                                                                                                                                                         
|      | 
|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.                                                                                                                                                                                                                                                                                                                                                                



50