AMFI Amcore Financial (MM)

ROCKFORD, Ill., July 17 /PRNewswire-FirstCall/ -- (Numbers in Thousands, Except Per Share Data) 2nd 2nd 1st quarter 2008 quarter 2007 quarter 2008 Net Revenues $55,559 $60,166 $54,583 Net Income (Loss) ($20,234) $10,603 ($27,459) Diluted Shares 22,246 23,389 22,233 Diluted EPS ($0.91) $0.46 ($1.25) AMCORE Financial, Inc. (NASDAQ:AMFI) announced today a net loss for the second quarter 2008 of ($20.2) million, compared to net income of $10.6 million in the prior-year period and a ($27.5) million loss in the previous quarter. The loss per diluted share for second quarter 2008 was ($0.91), a decrease from earnings of $0.46 per diluted share in second quarter 2007 and an improvement from the loss of ($1.25) in the previous quarter. "While uncertainty surrounding the general economy and financial services industry has negatively affected our stock price, we remain a well-capitalized bank and have sufficient liquidity. We are confident the actions we have taken to address our credit practices and efficiency issues will help strengthen our financial position," said William R. McManaman, Chairman and CEO of AMCORE. "AMCORE has been diligent in recognizing and addressing our credit issues and our progress continued in the second quarter." The following reflects some of the key actions: -- Tightened our credit disciplines and strengthened our commercial credit approval process to provide more consistent controls. -- Reassessed the risk grading of our commercial loan portfolio to reflect current market conditions. -- Initiated an experienced, independent third-party review of our lending policies, procedures and practices, which should be completed in the third quarter. -- Named a new Chief Credit Officer. -- Named a new manager of Loan and Appraisal Review. Headlines -- Net interest income was $36.0 million, or 3.07 percent of average earning assets in second quarter 2008, compared to $40.7 million, or 3.39 percent, in second quarter 2007, and $36.7 million, or 3.12 percent of average earning assets in first quarter 2008. -- Average loan balances decreased three percent, or $109.5 million, to $3.9 billion compared to second quarter 2007, while average investment securities increased three percent, or $25.0 million. Average bank issued deposits decreased seven percent, or $232.2 million, to $3.2 billion compared to the second quarter 2007. -- Provision for loan losses was $40 million, a $35.8 million increase from $4.2 million in second quarter 2007 and a $17.2 million decrease from $57.2 million in first quarter 2008. An additional $3.1 million expense relating to unfunded loan commitments was reported in operating expenses in first quarter 2008. -- Net charge-offs were $3.3 million, or 0.34 percent of average loans on an annualized basis, compared to $4.8 million and 0.48 percent in second quarter 2007, and $13.6 million and 1.40 percent in first quarter 2008, respectively. Provision for loan losses are accrued when losses are probable, whereas chargeoffs occur when the loss is subsequently confirmed. -- Non-performing loans were $171.8 million, compared to $37.7 million at June 30, 2007 and $114.1 million at March 31, 2008. -- Non-interest income was flat compared to second quarter 2007 and increased nine percent, or $1.6 million, compared to first quarter 2008. -- To better utilize capacity and increase efficiencies, AMCORE will consolidate four facilities and recorded $1.5 million in associated property write-downs during the second quarter. AMCORE also recorded a non-cash charge to remove all goodwill from the balance sheet, totaling $6.1 million. This charge was neutral in its effect on regulatory capital levels. -- AMCORE is moving forward to better meet customer needs and now offers a surcharge-free ATM network for AMCORE cardholders that expands the Company's channel of ATMs from roughly 350 to more than 800 throughout Illinois and Wisconsin, and more than 14,000 across the country. Revenues Net revenues decreased $4.6 million to $55.6 million in second quarter 2008 from $60.2 million during the same quarter a year ago and increased $976,000 from $54.6 million in the previous quarter. The decrease from a year ago was primarily due to lower loan balances and increased levels of non- accrual loans. Net interest income decreased to $36.0 million in second quarter 2008 from $40.7 million during the same quarter a year ago and $36.7 million in first quarter 2008. The net interest margin decreased 32 basis points to 3.07 percent in second quarter 2008 from 3.39 percent in second quarter 2007, and decreased five basis points compared to first quarter 2008. Components contributing to the decrease included: increased non-accrual loans, including the reversal of interest income of nearly $1.0 million from loans that were moved to non-accrual status during the quarter; and a decline in average loan balances. Total non-interest income was essentially flat compared to second quarter 2007 and increased nine percent, or $1.6 million, compared to first quarter 2008 primarily due to increases in deposit service charges and derivative mark-to-market income in the current quarter compared to losses in the previous quarter. Operating Expenses Expenses in second quarter 2008 were $48.3 million and included $1.5 million in charges related to the planned consolidation of four facilities in order to better utilize resources; $6.1 million reduction in goodwill and $1.3 million of increased FDIC insurance premiums. Expenses in first quarter 2008 included a $3.1 million expense relating to unfunded loan commitments and $1.7 million in charges related to executive retirement and other severance costs. Asset Quality & Loan Loss The percentage of total non-performing assets to total assets was 3.50 percent at June 30, 2008, up from 0.78 percent at June 30, 2007 and 2.25 percent at March 31, 2008. AMCORE's loan portfolio has been heavily concentrated in commercial real estate, specifically in construction and land development loans and non-residential commercial real estate loans. Construction and land development loans represent about 24 percent of total commercial loans outstanding and 19 percent of total loans. Of the specific allocations made in provision levels, 61 percent are from this portfolio. Net charge-offs were $3.3 million, a decrease of $1.5 million from second quarter 2007 and a decrease of $10.3 million from first quarter 2008. Net charge-offs were 34 basis points of average loans on an annualized basis during second quarter 2008, compared to 48 basis points for second quarter 2007 and 140 basis points for first quarter 2008. Provision for loan losses are accrued when losses are probable and estimable, whereas chargeoffs occur when the loss is subsequently confirmed. Provision for loan losses was $40 million, a $35.8 million increase from $4.2 million in second quarter 2007 and a $17.2 decrease from $57.2 million in first quarter 2008. Judy Carre Sutfin, Executive Vice President and CFO stated, "A positive indicator is the fact that delinquencies, which include loans more than 30 days past due, are down 12 percent quarter over quarter. While there is no doubt that last quarter's delinquencies contributed to this quarter's increase in non-performing loans, the delinquencies that migrated to non-performing were not replaced at the same pace as the previous quarter." Additional financial data for the Company's earnings call will be available in the presentation section of the Investor Relations page on the Company's website at http://www.amcore.com/. AMCORE Financial, Inc. is headquartered in Northern Illinois and has banking assets of $5.2 billion with 80 locations in Illinois and Wisconsin. AMCORE provides a full range of consumer and commercial banking services, a variety of mortgage lending products and wealth management services including trust, brokerage, private banking, financial planning, investment management, insurance and comprehensive retirement plan services. This news release 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 or adverse findings or rulings made by local, state or federal regulators or agencies regarding AMCORE and its operations; (III) failure to obtain new customers and retain existing customers; (IV) inability to carry out marketing and/or expansion plans; (V)ability to attract and retain key executives or personnel; (VI) changes in interest rates including the effect of prepayments; (VII) general economic and business conditions which are less favorable than expected; (VIII)equity and fixed income market fluctuations; (IX) unanticipated changes in industry trends; (X) unanticipated changes in credit quality and risk factors; (XI) success in gaining regulatory approvals when required; (XII)changes in Federal Reserve Board monetary policies; (XIII) unexpected outcomes on existing or new litigation in which AMCORE, its subsidiaries, officers, directors or employees are named defendants; (XIV) technological changes; (XV) changes in 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; (XVIII) disruption of operations caused by the conversion and installation of data processing systems; and (XIX) zoning restrictions or other limitations at the local level, which could prevent limited branch offices from transitioning to full-service facilities. AMCORE common stock is listed on The NASDAQ Stock Market under the symbol "AMFI." Further information about AMCORE Financial, Inc. can be found at the Company's website at http://www.amcore.com/. AMCORE Financial, Inc. CONSOLIDATED FINANCIAL SUMMARY (Unaudited) ($ in 000's except per share data) 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. SHARE DATA 2008 2008 2007 2007 Diluted earnings per share: $(0.91) $(1.25) $0.34 $0.08 Cash dividends $0.05 $0.185 $0.185 $0.185 Book value $14.08 $15.67 $16.80 $16.76 Average diluted shares outstanding 22,246 22,233 22,466 22,948 Ending shares outstanding 22,279 22,244 22,231 22,771 INCOME STATEMENT Total Interest Income $69,088 $75,801 $83,865 $87,592 Total Interest Expense 33,062 39,117 44,766 47,221 Net interest income 36,026 36,684 39,099 40,371 Provision for loan losses 40,000 57,229 6,400 15,281 Non-interest income: Investment management & trust 4,394 4,307 4,495 4,519 Service charges on deposits 8,680 7,334 8,001 7,852 Net mortgage revenues (5) 345 202 230 Company owned life insurance 1,106 1,236 1,481 1,747 Brokerage commission 1,258 1,313 1,013 1,107 Bankcard fee income 2,286 2,005 2,060 1,995 Net security (losses) gains - 1,010 (346) (5,574) Other 1,814 349 1,238 2,149 Total non-interest income 19,533 17,899 18,144 14,025 Operating expenses: Personnel costs 22,039 24,374 22,278 22,188 Net occupancy & equipment 6,469 6,842 6,280 6,167 Data processing 763 751 884 843 Professional fees 1,955 2,547 2,061 2,503 Communication 1,301 1,259 1,280 1,385 Advertising & business development 616 708 1,400 794 Other 15,174 8,418 6,566 5,180 Total operating expenses 48,317 44,899 40,749 39,060 Income before income taxes (32,758) (47,545) 10,094 55 Income tax (benefit) expense (12,524) (20,086) 2,564 (1,834) Net Income $(20,234) $(27,459) $7,530 $1,889 ($ in 000's except per share data) 2nd Qtr. 2Q/1Q 2Q 08/07 SHARE DATA 2007 Inc(Dec) Inc(Dec) Diluted earnings per share: $0.46 (27%) (298%) Cash dividends $0.185 (73%) (73%) Book value $16.58 (10%) (15%) Average diluted shares outstanding 23,389 0% (5%) Ending shares outstanding 23,213 0% (4%) INCOME STATEMENT Total Interest Income $86,817 (9%) (20%) Total Interest Expense 46,099 (15%) (28%) Net interest income 40,718 (2%) (12%) Provision for loan losses 4,227 (30%) 846% Non-interest income: Investment management & trust 3,671 2% 20% Service charges on deposits 7,436 18% 17% Net mortgage revenues 513 (101%) (101%) Company owned life insurance 1,247 (11%) (11%) Brokerage commission 1,191 (4%) 6% Bankcard fee income 1,947 14% 17% Net security (losses) gains - (100%) 0% Other 3,443 420% (47%) Total non-interest income 19,448 9% 0% Operating expenses: Personnel costs 23,998 (10%) (8%) Net occupancy & equipment 5,852 (5%) 11% Data processing 955 2% (20%) Professional fees 1,904 (23%) 3% Communication 1,270 3% 2% Advertising & business development 835 (13%) (26%) Other 5,734 80% 165% Total operating expenses 40,548 8% 19% Income before income taxes 15,391 (31%) (313%) Income tax (benefit) expense 4,788 (38%) (362%) Net Income $10,603 (26%) (291%) 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. KEY RATIOS AND DATA 2008 2008 2007 2007 Net interest margin (FTE) 3.07% 3.12% 3.28% 3.35% Return on average assets -1.58% -2.13% 0.58% 0.14% Return on average equity -23.54% -29.44% 7.94% 1.97% Efficiency ratio 86.97% 82.26% 71.19% 71.81% Equity/assets (end of period) 6.06% 6.64% 7.10% 7.16% Allowance to loans (end of period) 3.44% 2.48% 1.35% 1.31% Allowance to non-accrual loans 78% 86% 130% 187% Allowance to non- performing loans 78% 85% 75% 125% Non-accrual loans to loans 4.40% 2.89% 1.04% 0.70% Non-performing assets to total assets 3.50% 2.25% 1.45% 0.89% ($ in millions) Total assets under administration $2,458 $2,712 $2,728 $2,789 Mortgage loans closed $72 $74 $51 $64 Mortgage servicing rights, net $0.1 $0.1 $0.1 $0.1 2nd Qtr. Basis Point Basis Point KEY RATIOS AND DATA 2007 Change Change Net interest margin (FTE) 3.39% (5) (32) Return on average assets 0.81% 55 (239) Return on average equity 10.99% 590 (3453) Efficiency ratio 67.39% 471 1958 Equity/assets (end of period) 7.17% (58) (111) Allowance to loans (end of period) 1.01% 96 243 Allowance to non-accrual loans 133% (760) (5464) Allowance to non-performing loans 108% (717) (3033) Non-accrual loans to loans 0.76% 151 364 Non-performing assets to total assets 0.78% 125 272 ($ in millions) Total assets under administration $2,817 (9%) (13%) Mortgage loans closed $87 (3%) (17%) Mortgage servicing rights, net $1.2 0% (92%) AMCORE Financial, Inc. CONSOLIDATED FINANCIAL SUMMARY (cont.) (Unaudited) ($ in 000's) 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. AVERAGE BALANCE SHEET 2008 2008 2007 2007 Assets: Investment securities, at cost $893,769 $874,672 $871,626 $860,426 Short-term investments 18,992 5,472 6,856 4,814 Loans held for sale 7,811 8,565 6,653 8,514 Loans: Commercial 785,912 774,482 776,557 803,529 Commercial real estate 2,310,215 2,346,154 2,358,906 2,382,397 Residential real estate 455,929 473,545 488,532 491,982 Consumer 344,787 335,272 319,808 316,879 Total loans $3,896,843 $3,929,453 $3,943,803 $3,994,787 Total earning assets $4,817,415 $4,818,162 $4,828,938 $4,868,541 Allowance for loan losses (99,197) (53,982) (52,499) (42,354) Goodwill 6,081 6,148 6,148 6,148 Other non-earning assets 424,046 404,324 412,641 414,042 Total assets $5,148,345 $5,174,652 $5,195,228 $5,246,377 Liabilities and Stockholders' Equity: Non-interest bearing deposits $492,882 $479,571 $496,301 $499,550 Interest bearing deposits 1,781,361 1,824,232 1,873,883 1,809,846 Time deposits 944,914 994,795 1,067,981 1,130,992 Total bank issued deposits $3,219,157 $3,298,598 $3,438,165 $3,440,388 Wholesale deposits 683,246 593,083 620,500 649,906 Short-term borrowings 480,092 485,708 327,678 294,584 Long-term borrowings 364,277 367,492 368,657 421,826 Total wholesale funding $1,527,615 $1,446,283 $1,316,835 $1,366,316 Total interest bearing liabilities 4,253,890 4,265,310 4,258,699 4,307,154 Other liabilities 55,914 54,695 64,144 59,949 Total liabilities $4,802,686 $4,799,576 $4,819,144 $4,866,653 Stockholders' equity 345,498 373,870 377,775 391,731 Other comprehensive loss 161 1,206 (1,691) (12,007) Total stockholders' equity 345,659 375,076 376,084 379,724 Total liabilities & stockholders' equity $5,148,345 $5,174,652 $5,195,228 $5,246,377 CREDIT QUALITY Ending allowance for loan losses $133,393 $96,732 $53,140 $51,500 Net charge-offs 3,339 13,637 4,760 4,495 Net charge-offs to avg loans (annualized) 0.34% 1.40% 0.48% 0.45% Non-performing assets: Non-accrual loans $170,910 $112,945 $40,972 $27,603 Loans 90 days past due & still accruing 894 1,107 29,826 13,571 Total non- performing loans 171,804 114,052 70,798 41,174 Foreclosed real estate 8,906 2,422 4,108 5,251 Other foreclosed assets 257 246 201 236 Total non- performing assets $180,967 $116,720 $75,107 $46,661 YIELD AND RATE ANALYSIS Assets: Investment securities (FTE) 4.70% 4.71% 4.61% 4.56% Short-term investments 2.16% 4.04% 5.31% 6.61% Loans held for sale 5.96% 6.54% 7.61% 6.51% Loans: Commercial 5.92% 6.78% 7.80% 8.24% Commercial real estate 5.94% 6.66% 7.42% 7.75% Residential real estate 5.94% 6.40% 6.94% 7.13% Consumer 7.90% 7.93% 7.96% 7.76% Total loans (FTE) 6.11% 6.76% 7.48% 7.77% Total interest earning assets (FTE) 5.83% 6.38% 6.96% 7.20% Liabilities: Interest bearing deposits 1.63% 2.42% 3.23% 3.44% Time deposits 3.98% 4.36% 4.58% 4.70% Total bank issued deposits 2.45% 3.11% 3.72% 3.92% Wholesale deposits 4.66% 5.02% 5.11% 5.13% Short-term borrowings 3.20% 4.02% 4.80% 5.08% Long-term borrowings 5.22% 5.55% 5.63% 5.61% Total wholesale funding 4.32% 4.82% 5.18% 5.27% Total interest bearing liabilities 3.12% 3.69% 4.17% 4.35% Net interest spread 2.71% 2.69% 2.79% 2.85% Net interest margin (FTE) 3.07% 3.12% 3.28% 3.35% FTE adjustment (000's) $803 $746 $701 $657 ($ in 000's) 2nd Qtr. 2Q/1Q 2Q 08/07 Ending AVERAGE BALANCE SHEET 2007 Inc(Dec) Inc(Dec) Balances Assets: Investment securities, at cost $868,713 2% 3% $897,612 Short-term investments 3,584 247% 430% 4,135 Loans held for sale 13,477 (9%) (42%) 8,263 Loans: Commercial 809,739 1% (3%) 793,294 Commercial real estate 2,389,201 (2%) (3%) 2,290,191 Residential real estate 495,046 (4%) (8%) 439,368 Consumer 312,404 3% 10% 358,038 Total loans $4,006,390 (1%) (3%) $3,880,891 Total earning assets $4,892,164 (0%) (2%) $4,790,901 Allowance for loan losses (43,069) 84% 130% (133,393) Goodwill 6,148 (1%) (1%) - Other non-earning assets 410,019 5% 3% 517,288 Total assets $5,265,262 (1%) (2%) $5,174,796 Liabilities and Stockholders' Equity: Non-interest bearing deposits $502,813 3% (2%) $512,316 Interest bearing deposits 1,786,600 (2%) (0%) 1,669,275 Time deposits 1,161,978 (5%) (19%) 991,233 Total bank issued deposits $3,451,391 (2%) (7%) $3,172,824 Wholesale deposits 648,270 15% 5% 783,546 Short-term borrowings 323,911 (1%) 48% 482,125 Long-term borrowings 389,008 (1%) (6%) 364,290 Total wholesale funding $1,361,189 6% 12% $1,629,961 Total interest bearing liabilities 4,309,767 (0%) (1%) 4,290,469 Other liabilities 65,784 2% (15%) 58,245 Total liabilities $4,878,364 0% (2%) $4,861,030 Stockholders' equity 396,666 (8%) (13%) 320,312 Other comprehensive loss (9,768) (87%) (102%) (6,546) Total stockholders' equity 386,898 (8%) (11%) 313,766 Total liabilities & stockholders' equity $5,265,262 (1%) (2%) $5,174,796 CREDIT QUALITY Ending allowance for loan losses $40,714 38% 228% Net charge-offs 4,821 (76%) (31%) Net charge-offs to avg loans (annualized) 0.48% (76%) (29%) Non-performing assets: Non-accrual loans $30,683 51% 457% Loans 90 days past due & still accruing 7,024 (19%) (87%) Total non- performing loans 37,707 51% 356% Foreclosed real estate 3,553 268% 151% Other foreclosed assets 164 4% 57% Total non- performing assets $41,424 55% 337% YIELD AND RATE ANALYSIS Assets: Investment securities (FTE) 4.42% Short-term investments 6.27% Loans held for sale 5.68% Loans: Commercial 8.27% Commercial real estate 7.76% Residential real estate 7.03% Consumer 7.69% Total loans (FTE) 7.77% Total interest earning assets(FTE) 7.17% Liabilities: Interest bearing deposits 3.30% Time deposits 4.69% Total bank issued deposits 3.85% Wholesale deposits 5.11% Short-term borrowings 5.09% Long-term borrowings 5.62% Total wholesale funding 5.25% Total interest bearing liabilities 4.29% Net interest spread 2.88% Net interest margin(FTE) 3.39% FTE adjustment(000's) $619 DATASOURCE: AMCORE Financial, Inc. CONTACT: Media, Katherine Taylor, Investor Relations Manager, +1-815-961-7164, or Financial, Judy Carre Sutfin, Executive Vice President and CFO, +1-815-961-7081, both of AMCORE Financial, Inc. Web site: http://www.amcore.com/

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