AMFI Amcore Financial (MM)

ROCKFORD, Ill., Oct. 16 /PRNewswire-FirstCall/ -- AMCORE Financial, Inc. (NASDAQ:AMFI) today announced financial results for the third quarter ended September 30, 2008. (Numbers in Thousands, Except Per Share Data) 3rd quarter 2008 3rd quarter 2007 2nd quarter 2008 Net Revenues $52,507 $54,396 $55,542 Net Income (Loss) ($17,987) $1,889 ($20,234) Diluted Shares 22,647 23,316 22,614 Diluted EPS ($0.79) $0.08 ($0.89) AMCORE reported a net loss of $18.0 million for third quarter 2008, compared to net income of $1.9 million in the prior-year period and a net loss of $20.2 million in the previous quarter. Loss per diluted share was ($0.79) for third quarter 2008, compared to earnings of $0.08 per diluted share in third quarter 2007, and an improvement from the loss of ($0.89) in the previous quarter. "Unprecedented marketplace events this year have caused global financial confidence to drop sharply, which has negatively affected the entire U.S. financial services industry, including AMCORE," said William R. McManaman, Chairman and CEO of AMCORE. "We are confronting these economic challenges by setting aside adequate reserves for potential loan losses and actively managing capital to enhance our stability. Moving forward, we are confident that the strategy we have in place will help us to navigate through today's economic headwinds, maintain high levels of customer satisfaction, and position AMCORE for future success." The following reflects some of the key strategic actions taken in the third quarter: -- Reaffirmed the Bank's roots with the "one bank" focus to expand and grow our customer relationships across all lines of business. The objective is to leverage the combined, diverse expertise of our organization to offer clients a full range of specialized, targeted financial products specifically designed to help them achieve their unique financial goals. -- Continued to actively manage the Bank's capital position to promote flexibility, expand our execution capabilities, and create long-term shareholder value. AMCORE continues to be above the well capitalized threshold and maintains nearly $450 million in regulatory capital. -- Improved credit policies and practices and implemented more consistent controls and safeguards to assure continued financial strength. -- Completed the third party review of the commercial credit portfolio. Results confirmed that the Company has successfully implemented its enhanced loan grading system and has an effective risk grading process. -- Focused on building and growing our commercial and industrial lending relationships and reducing our commercial real estate concentration. Headlines -- Net interest income was $32.3 million, or 2.76 percent of average earning assets in third quarter 2008, compared to $40.4 million, or 3.35 percent, in third quarter 2007, and $36.0 million, or 3.07 percent of average earning assets in second quarter 2008. -- Provision for loan losses was $48.0 million, a $32.7 million increase from $15.3 million in third quarter 2007 and an $8.0 million increase from $40.0 million in second quarter 2008. -- Net charge-offs were $26.8 million compared to $4.5 million in third quarter 2007, and $3.3 million in second quarter 2008. Provision for loan losses are accrued when losses are probable, whereas chargeoffs are taken when the loss is subsequently confirmed. -- Non-performing loans were $191.4 million, compared to $41.2 million at September 30, 2007 and $171.8 million at June 30, 2008. -- Delinquent loans increased 23 percent from third quarter 2007, but declined 13 percent from the previous quarter. This is the second consecutive quarterly decline since peaking in first quarter 2008. -- Non-interest income was up 44 percent compared to third quarter 2007 and four percent compared to second quarter 2008, primarily due to impairment losses on investment securities in the prior year period. -- Operating expenses declined two percent compared to third quarter 2007 and 21 percent or $9.9 million compared to second quarter 2008. Revenues Net revenues decreased $1.9 million to $52.5 million in third quarter 2008 from $54.4 million during the same quarter a year ago and decreased $3.0 million from $55.5 million in the previous quarter. The decreases from both periods were primarily due to interest income reversals and funding costs on higher levels of non-accrual loans, pricing pressure on funding sources and lower loan balances. The net interest margin decreased 59 basis points to 2.76 percent in third quarter 2008 from 3.35 percent in third quarter 2007, and decreased 31 basis points compared to second quarter 2008. Average loan balances decreased two percent, or $89.8 million, to $3.8 billion compared to second quarter 2008, while average investment securities decreased one percent, or $11.5 million. Average bank issued deposits decreased seven percent, or $232 million, to $3.0 billion compared to second quarter 2008. While there was some attrition in the deposit base, this was primarily due to two large institutional transactions. First, one large collateralized municipal deposit re-priced and went elsewhere, freeing up that collateral for other use. Second, a large escrow deposit was held for a short period of time in the second quarter and was paid out, affecting average balances. Total non-interest income increased 44 percent, or $6.2 million compared to third quarter 2007 and increased four percent, or $712,000, compared to second quarter 2008. The increase over the year ago period was primarily due to the $5.6 million investment securities impairment charge in third quarter 2007 and increased service charges on deposits. The increase from the previous quarter was mainly due to CRA-related fund investment income. Operating Expenses Expenses in third quarter 2008 were $38.4 million, compared to $39.1 million for the same period in 2007 and $48.3 million in second quarter 2008. Overall expenses were down, even with increased expenses of $680,000 relating to new branches and $850,000 in increased FDIC insurance premiums when compared to the prior year quarter. Second quarter 2008 included $1.5 million in charges related to the planned facilities consolidation and $6.1 million goodwill impairment charge. Asset Quality The percentage of total non-performing assets to total assets was 4.03 percent at September 30, 2008, up from 0.89 percent at September 30, 2007 and 3.50 percent at June 30, 2008. AMCORE's loan portfolio has been heavily concentrated in commercial real estate, specifically in construction and land development loans and vacant land loans. "We are confident in the eventual recovery of the market, and remain focused on preserving our strength and stability as we move forward," said Judy Carre Sutfin, Executive Vice President and CFO. "A positive indicator is the fact that delinquencies, which include loans more than 30 days past due, are down 13%, or $12.3 million, quarter over quarter. This is the second quarterly decline." 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/. ABOUT AMCORE AMCORE Financial, Inc. is headquartered in Northern Illinois and has banking assets of $5.0 billion with 78 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. 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/. FORWARD LOOKING STATEMENTS 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; (XIX) adverse economic or business conditions affecting specific loan portfolio types in which the Company has a concentration, such as construction, land development and other land loans, and (XX) zoning restrictions or other limitations at the local level, which could prevent limited branch offices from transitioning to full-service facilities. AMCORE Financial, Inc. CONSOLIDATED FINANCIAL SUMMARY (Unaudited) ($ in 000's except per share data) 3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr. SHARE DATA 2008 2008 2008 2007 Diluted earnings per share: $(0.79) $(0.89) $(1.21) $0.33 Cash dividends $0.050 $0.049 $0.180 $0.180 Book value $12.74 $13.85 $15.21 $16.31 Average diluted shares outstanding 22,647 22,614 22,601 22,834 Ending shares outstanding 22,655 22,647 22,612 22,599 INCOME STATEMENT Total Interest Income $66,452 $69,088 $75,801 $83,865 Total Interest Expense 34,190 33,079 39,135 44,766 Net interest income 32,262 36,009 36,666 39,099 Provision for loan losses 48,000 40,000 57,229 6,400 Non-interest income: Investment management & trust 3,907 4,394 4,307 4,495 Service charges on deposits 9,152 8,680 7,334 8,001 Net mortgage revenues 203 (5) 345 202 Company owned life insurance 1,227 1,106 1,236 1,481 Brokerage commission 963 1,258 1,313 1,013 Bankcard fee income 2,241 2,286 2,005 2,060 Net security (losses) gains - - 1,010 (346) Other 2,552 1,814 349 1,238 Total non-interest income 20,245 19,533 17,899 18,144 Operating expenses: Personnel costs 21,328 22,039 24,374 22,278 Net occupancy & equipment 6,469 6,469 6,842 6,280 Data processing 715 763 751 884 Professional fees 1,981 1,955 2,547 2,061 Communication 1,318 1,301 1,259 1,280 Advertising & business development 796 616 708 1,400 Other 5,757 15,157 8,400 6,566 Total operating expenses 38,364 48,300 44,881 40,749 Income before income taxes (33,857) (32,758) (47,545) 10,094 Income tax (benefit) expense (15,870) (12,524) (20,086) 2,564 Net Income $(17,987) $(20,234) $(27,459) $7,530 ($ in 000's except per share data) 3rd Qtr. 3Q/2Q 3Q 08/07 SHARE DATA 2007 Inc(Dec) Inc(Dec) Diluted earnings per share: $0.08 (11%) N/M Cash dividends $0.180 2% (72%) Book value $16.28 (8%) (22%) Average diluted shares outstanding 23,316 0% (3%) Ending shares outstanding 23,139 0% (2%) INCOME STATEMENT Total Interest Income $87,592 (4%) (24%) Total Interest Expense 47,221 3% (28%) Net interest income 40,371 (10%) (20%) Provision for loan losses 15,281 20% 214% Non-interest income: Investment management & trust 4,519 (11%) (14%) Service charges on deposits 7,852 5% 17% Net mortgage revenues 230 N/M (12%) Company owned life insurance 1,747 11% (30%) Brokerage commission 1,107 (23%) (13%) Bankcard fee income 1,995 (2%) 12% Net security (losses) gains (5,574) 0% (100%) Other 2,149 41% 19% Total non-interest income 14,025 4% 44% Operating expenses: Personnel costs 22,188 (3%) (4%) Net occupancy & equipment 6,167 0% 5% Data processing 843 (6%) (15%) Professional fees 2,503 1% (21%) Communication 1,385 1% (5%) Advertising & business development 794 29% 0% Other 5,180 (62%) 11% Total operating expenses 39,060 (21%) (2%) Income before income taxes 55 3% N/M Income tax (benefit) expense (1,834) 27% N/M Net Income $1,889 (11%) N/M 3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr. KEY RATIOS AND DATA 2008 2008 2008 2007 Net interest margin (FTE) 2.76% 3.07% 3.12% 3.28% Return on average assets -1.40% -1.58% -2.13% 0.58% Return on average equity -22.77% -23.54% -29.44% 7.94% Efficiency ratio 73.06% 86.97% 82.26% 71.19% Equity/assets (end of period) 5.76% 6.06% 6.64% 7.10% Allowance to loans (end of period) 3.54% 3.44% 2.48% 1.35% Allowance to non-accrual loans 71% 78% 86% 130% Allowance to non-performing loans 70% 78% 85% 75% Non-accrual loans to loans 4.99% 4.40% 2.89% 1.04% Non-performing assets to total assets 4.03% 3.50% 2.25% 1.45% ($ in millions) Total assets under administration $2,247 $2,458 $2,712 $2,728 Mortgage loans closed $38 $72 $74 $51 Mortgage servicing rights, net $0.1 $0.1 $0.1 $0.1 Basis Basis 3rd Qtr. Point Point KEY RATIOS AND DATA 2007 Change Change Net interest margin (FTE) 3.35% (31) (59) Return on average assets 0.14% 18 (154) Return on average equity 1.97% 77 N/M Efficiency ratio 71.81% N/M 125 Equity/assets (end of period) 7.16% (30) (140) Allowance to loans (end of period) 1.31% 10 223 Allowance to non-accrual loans 187% N/M N/M Allowance to non-performing loans 125% N/M N/M Non-accrual loans to loans 0.70% 59 429 Non-performing assets to total assets 0.89% 53 314 ($ in millions) Total assets under administration $2,789 (9%) (19%) Mortgage loans closed $64 (47%) (41%) Mortgage servicing rights, net $0.1 0% 0% N/M = not meaningful AMCORE Financial, Inc. CONSOLIDATED FINANCIAL SUMMARY (cont.) (Unaudited) ($ in 000's) 3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr. AVERAGE BALANCE SHEET 2008 2008 2008 2007 Assets: Investment securities, at cost $882,289 $893,769 $874,672 $871,626 Short-term investments 96,027 18,992 5,472 6,856 Loans held for sale 4,523 7,811 8,565 6,653 Loans: Commercial 765,776 785,912 774,482 776,557 Commercial real estate 2,234,286 2,310,215 2,346,154 2,358,906 Residential real estate 445,837 455,929 473,545 488,532 Consumer 361,107 344,787 335,272 319,808 Total loans $3,807,006 $3,896,843 $3,929,453 $3,943,803 Total earning assets $4,789,845 $4,817,415 $4,818,162 $4,828,938 Allowance for loan losses (123,693) (99,197) (53,982) (52,499) Goodwill - 6,081 6,148 6,148 Other non-earning assets 438,972 424,046 404,324 412,641 Total assets $5,105,124 $5,148,345 $5,174,652 $5,195,228 Liabilities and Stockholders' Equity: Non-interest bearing deposits $476,378 $492,882 $479,571 $496,301 Interest bearing deposits 1,462,149 1,781,361 1,824,232 1,873,883 Time deposits 1,048,560 944,914 994,795 1,067,981 Total bank issued deposits $2,987,087 $3,219,157 $3,298,598 $3,438,165 Wholesale deposits 887,366 683,246 593,083 620,500 Short-term borrowings 510,945 480,092 485,708 327,678 Long-term borrowings 350,035 364,277 367,492 368,657 Total wholesale funding $1,748,346 $1,527,615 $1,446,283 $1,316,835 Total interest bearing liabilities 4,259,055 4,253,890 4,265,310 4,258,699 Other liabilities 55,456 55,914 54,695 64,144 Total liabilities $4,790,889 $4,802,686 $4,799,576 $4,819,144 Stockholders' equity 320,549 345,498 373,870 377,775 Other comprehensive loss (6,314) 161 1,206 (1,691) Total stockholders' equity 314,235 345,659 375,076 376,084 Total liabilities & stockholders' equity $5,105,124 $5,148,345 $5,174,652 $5,195,228 CREDIT QUALITY Ending allowance for loan losses $134,833 $133,393 $96,732 $53,140 Net charge-offs 26,757 3,339 13,637 4,760 Net charge-offs to avg loans (annualized) 2.80% 0.34% 1.40% 0.48% Non-performing assets: Non-accrual loans $190,135 $170,910 $112,945 $40,972 Loans 90 days past due & still accruing 1,267 894 1,107 29,826 Total non- performing loans 191,402 171,804 114,052 70,798 Foreclosed real estate 10,224 8,906 2,422 4,108 Other foreclosed assets 393 257 246 201 Total non-performing assets $202,019 $180,967 $116,720 $75,107 YIELD AND RATE ANALYSIS Assets: Investment securities (FTE) 4.65% 4.70% 4.71% 4.61% Short-term investments 1.95% 2.16% 4.04% 5.31% Loans held for sale 6.85% 5.96% 6.54% 7.61% Loans: Commercial 5.64% 5.92% 6.78% 7.80% Commercial real estate 5.70% 5.94% 6.66% 7.42% Residential real estate 5.79% 5.94% 6.40% 6.94% Consumer 7.87% 7.90% 7.93% 7.96% Total loans (FTE) 5.90% 6.11% 6.76% 7.48% Total interest earning assets (FTE) 5.60% 5.83% 6.38% 6.96% Liabilities: Interest bearing deposits 1.42% 1.63% 2.42% 3.23% Time deposits 3.79% 3.98% 4.36% 4.58% Total bank issued deposits 2.41% 2.45% 3.11% 3.72% Wholesale deposits 4.61% 4.66% 5.02% 5.11% Short-term borrowings 3.25% 3.20% 4.02% 4.80% Long-term borrowings 5.13% 5.22% 5.55% 5.63% Total wholesale funding 4.32% 4.32% 4.82% 5.18% Total interest bearing liabilities 3.19% 3.12% 3.69% 4.17% Net interest spread 2.41% 2.71% 2.69% 2.79% Net interest margin (FTE) 2.76% 3.07% 3.12% 3.28% FTE adjustment (000's) $844 $803 $746 $701 ($ in 000's) 3rd Qtr. 3Q/2Q 3Q 08/07 Ending AVERAGE BALANCE SHEET 2007 Inc(Dec) Inc(Dec) Balances Assets: Investment securities , at cost $860,426 (1%) 3% $850,272 Short-term investments 4,814 N/M N/M 14,940 Loans held for sale 8,514 (42%) (47%) 3,950 Loans: Commercial 803,529 (3%) (5%) 765,129 Commercial real estate 2,382,397 (3%) (6%) 2,238,821 Residential real estate 491,982 (2%) (9%) 438,447 Consumer 316,879 5% 14% 364,370 Total loans $3,994,787 (2%) (5%) $3,806,767 Total earning assets $4,868,541 (1%) (2%) $4,675,929 Allowance for loan losses (42,354) 25% 192% (134,833) Goodwill 6,148 (100%) (100%) - Other non-earning assets 414,042 4% 6% 472,171 Total assets $5,246,377 (1%) (3%) $5,013,267 Liabilities and Stockholders' Equity: Non-interest bearing deposits $499,550 (3%) (5%) $462,129 Interest bearing deposits 1,809,846 (18%) (19%) 1,298,238 Time deposits 1,130,992 11% (7%) 1,102,954 Total bank issued deposits $3,440,388 (7%) (13%) $2,863,321 Wholesale deposits 649,906 30% 37% 949,981 Short-term borrowings 294,584 6% 73% 545,551 Long-term borrowings 421,826 (4%) (17%) 316,809 Total wholesale funding $1,366,316 14% 28% $1,812,341 Total interest bearing liabilities 4,307,154 0% (1%) 4,213,533 Other liabilities 59,949 (1%) (7%) 49,073 Total liabilities $4,866,653 (0%) (2%) $4,724,735 Stockholders' equity 391,731 (7%) (18%) 301,568 Other comprehensive loss (12,007) N/M (47%) (13,036) Total stockholders' equity 379,724 (9%) (17%) 288,532 Total liabilities & stockholders' equity $5,246,377 (1%) (3%) $5,013,267 CREDIT QUALITY Ending allowance for loan losses $51,500 1% 162% Net charge-offs 4,495 N/M N/M Net charge-offs to avg loans (annualized) 0.45% N/M N/M Non-performing assets: Non-accrual loans $27,603 11% N/M Loans 90 days past due & still accruing 13,571 42% (91%) Total non-performing loans 41,174 11% N/M Foreclosed real estate 5,251 15% 95% Other foreclosed assets 236 53% 67% Total non-performing assets $46,661 12% N/M YIELD AND RATE ANALYSIS Assets: Investment securities (FTE) 4.56% Short-term investments 6.61% Loans held for sale 6.51% Loans: Commercial 8.24% Commercial real estate 7.75% Residential real estate 7.13% Consumer 7.76% Total loans (FTE) 7.77% Total interest earning assets (FTE) 7.20% Liabilities: Interest bearing deposits 3.44% Time deposits 4.70% Total bank issued deposits 3.92% Wholesale deposits 5.13% Short-term borrowings 5.08% Long-term borrowings 5.61% Total wholesale funding 5.27% Total interest bearing liabilities 4.35% Net interest spread 2.85% Net interest margin (FTE) 3.35% FTE adjustment (000's) $657 N/M = not meaningful DATASOURCE: AMCORE Financial, Inc. CONTACT: media, Katherine Taylor, Investor Relations Manager, +1-815-961-7164, or financial inquiries, Judith 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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