July 19, 2000
For media inquiries: For financial inquiries:
Katherine Taylor John Hecht
Investor Relations Manager Chief Financial Officer
815-961-7164 815-961-2787
AMCORE Financial, Inc. Reports Earnings Per Share
of 39 Cents for 2nd Quarter 2000
Return on Equity At 15 percent For Third Consecutive Quarter
ROCKFORD, IL -- AMCORE Financial, Inc. reported diluted earnings per share
of $0.39 on net income of $10.7 million and a return on equity of 15 percent for
the second quarter of 2000.
"For the third consecutive quarter we have met our 15 percent return on
equity goal," said Robert J. Meuleman, president and chief executive officer.
"While we are pleased we have met this goal and that we are realizing cost
savings from our new structure, we are disappointed that margin pressures from
the current challenging rate environment have offset these gains and prevented
us from making additional progress towards increased profitability this
quarter."
HIGHLIGHTS
----------
o Return on equity increased to 15 percent up from 13.92 percent in the
second quarter of 1999.
o Diluted earnings per share in the second quarter rose to $0.39, up from
$0.25 in the second quarter of 1999. Diluted earnings per share from
operations, before considering the effect of the $3.8 million of
restructuring charges in the second quarter of 1999 and a $141,000 accrual
reversal in the second quarter of 2000, was flat at $0.38 per share.
o Average loans for the second quarter were up 9.2 percent, or $234 million,
from the same period last year.
o Net interest margin contracted 13 basis points to 3.31 percent from the
first quarter of 2000, primarily the result of higher funding costs.
o The average rate paid on interest bearing liabilities rose 25 basis points
to 5.36 percent from 5.11 percent in the first quarter of 2000.
o Trust and asset management revenues decreased $156,000 or 2 percent when
compared to the second quarter of 1999. Excluding an accrual adjustment
made to revenue in the second quarter of 1999, trust and asset management
revenues increased 8.5 percent.
o Operating expenses declined $431,000 or 1.4 percent compared to the second
quarter of 1999.
o Average diluted shares outstanding decreased 4.3 percent or 1.2 million
shares due to the stock buy back.
Page 1
EARNINGS SUMMARY
----------------
Net income from operations for the second quarter was $10.5 million, a 3.2
percent decrease from $10.9 million in the second quarter of 1999. Net income,
which includes a $141,000 restructuring charge reversal, was $10.7 million for
the second quarter. This compares to $7.1 million in the second quarter of 1999,
which reflects the $3.8 million after tax restructuring charge taken last year.
Average earning assets rose 4.4 percent, which combined with a 33 basis
point increase in yields, from the same period last year, contributed to a $6.9
million increase in interest income. The growth in average earning assets was
led by a $234 million or 9.2 percent increase in average loans. These gains were
overshadowed by a $7.6 million or 18.3% increase in interest expense as the
average rate paid on interest bearing liabilities rose 59 basis points to 5.36
percent from 4.77 percent in the second quarter of 1999. Overall, net interest
income declined $637,000 or 2.0% as the net interest margin declined 25 basis
points to 3.31 percent from 3.56 percent in the second quarter of 1999.
"Our margins have declined as interest bearing funds repriced more rapidly
than earning assets in this rising rate environment," said Meuleman. "This has
been a very difficult interest rate environment for many banks to deal with not
only in terms of rising short term rates, but because of a flat-to-inverted
yield curve as well."
Trust and asset management revenues decreased 2 percent, or $156,000, to
$7.6 million in the second quarter of 2000 from $7.7 million in the second
quarter of 1999. The decrease reflects an accrual adjustment taken in the second
quarter last year. Excluding the accrual adjustment, trust and asset management
revenues increased 8.5 percent.
Mortgage revenues were down $931,000 or 44 percent for the quarter as the
less favorable interest rate environment contributed to lower refinancing
activity.
Total operating expenses declined $431,000 from a year ago to $30.1
million. Employee benefit costs rose 2.6 percent from the same period last year
due to higher medical claims in the Company's self-funded benefit trust account.
Despite annual cost-of-living and merit increases, total personnel costs
remained lower as the restructuring reflected a 0.4 percent decrease in
expenses. "Medical costs have become a much more difficult and unpredictable
cost to manage due to high levels of inflation in these expenses," said
Meuleman. "We have already implemented some cost saving measures and are looking
at additional ways to minimize the impact in the future. However, medical costs
are expected to remain at high levels for the remainder of the year."
Further expense savings are expected during the year as the final stages of
the Customer Focused Organizational Structure are completed. Commercial
operations and personal trust administration will continue their restructuring
during the second half of the year and are expected to be completed by the end
of the fourth quarter.
ASSET QUALITY AND RESERVES
--------------------------
The allowance for loan losses to ending loans increased to 1.08 percent at
June 30, 2000 from 1.07 percent at June 30, 1999. Reserve coverage of
non-performing loans was 103 percent at June 30, 2000, down from 157 percent at
June 30, 1999. Total non-performing assets at June 30, 2000 were $33.1 million,
or 0.75 percent of total assets. Net charge-offs represented 20 basis points
annualized of average loans for the second quarter compared to 38 basis points
in the second quarter of 1999.
Page 2
"We are pleased to report the significant reduction in net charge-offs
during the quarter, which were down 44 percent," said Meuleman. " Unfortunately,
we did add three credits to our nonaccrual loans, two of which were
agri-business related loans, which totaled $5.6 million of the $6.4 million
increase from March 31."
AMCORE Financial, Inc., is a financial services company headquartered in
northern Illinois with banking assets of $4.4 billion and 64 locations in
Illinois and Wisconsin. The company also has the following financial services
companies: AMCORE Mortgage, Inc., and AMCORE Investment Group. AMCORE Investment
Group provides trust and brokerage services, and through Investors Management
Group, provides capital management and mutual fund administrative services, and
is the investment advisor for the Vintage family of mutual funds.
This news release contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 with respect to
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", "may", "will"
or similar expressions are forward looking statements. Forward-looking
statements speak only as of the date they are made, and AMCORE undertakes no
obligation to update publicly any of them 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 and existing competitors; (II) adverse state 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) loss of 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)
inability to fully realize cost savings from the new organizational structure
within the expected time frame or additional or unexpected costs are incurred;
(XIV) unexpected outcomes on existing or new litigation in which AMCORE, its
subsidiaries, officers, directors or employees are named defendants; (XV)
technological changes; (XVI) changes in Generally Accepted Accounting
Principles: and (XVII) inability of third-party vendors to perform critical
services to the company.
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.
Page 3
AMCORE Financial, Inc.
CONSOLIDATED KEY FINANCIAL DATA SUMMARY
(in thousands, except share data)
Quarter Ended June 30, Six Months Ended June 30,
-----------------------------------------------------------------------------
Percent Percent
Financial Highlights 2000 1999 Change 2000 1999 Change
- --------------------------------------------------------------------------------------------------------------------------
Net revenues, including security gains....... $46,853 $ 47,889 (2.2%) $ 94,552 $ 93,880 0.7%
Net interest income - FTE.................... 34,286 35,205 (2.6%) 69,524 69,499 0.0%
Operating expenses........................... 30,114 30,545 (1.4%) 59,784 60,349 (0.9%)
Net income from operations................... 10,540 10,893 (3.2%) 21,627 20,929 3.3%
Net income................................... 10,681 7,126 49.9% 21,768 17,162 26.8%
Basic earnings per share from operations..... 0.39 0.39 0.0% 0.79 0.74 6.8%
Basic earnings per share..................... 0.39 0.25 56.0% 0.80 0.61 31.1%
Diluted earnings per share from operations... 0.38 0.38 0.0% 0.78 0.73 6.9%
Diluted earnings per share................... 0.39 0.25 56.0% 0.79 0.60 31.7%
Cash dividends per share..................... 0.16 0.14 14.3% 0.32 0.28 14.3%
Book value per share......................... 10.60 10.59 0.0
(in thousands, except share data) Trailing Twelve Months Ended
June 30,
------------------------------------------
Percent
Financial Highlights 2000 1999 Change
- ---------------------------------------------------------------------------------------
Net revenues, including security gains....... $ 191,268 $ 187,566 2.0%
Net interest income - FTE.................... 141,351 137,070 3.1%
Operating expenses........................... 118,129 119,317 (1.0%)
Net income from operations................... 44,108 43,175 2.2%
Net income................................... 44,755 39,408 13.6%
Basic earnings per share from operations..... 1.59 1.50 6.0%
Basic earnings per share..................... 1.62 1.37 18.2%
Diluted earnings per share from operations... 1.56 1.49 4.7%
Diluted earnings per share................... 1.59 1.36 16.9%
Cash dividends per share..................... 0.60 0.56 7.1%
Book value per share.........................
Quarter Ended June 30, Six Months Ended June 30,
Key Financial Ratios 2000 1999 Change 2000 1999 Change
- -----------------------------------------------------------------------------------------------------------------------
Return on average assets.................. 0.97% 1.04% (0.07%) 1.00% 1.01% (0.01%)
Return on average equity.................. 15.00% 13.92% 1.08% 15.31% 13.33% 1.98%
Net interest margin (FTE)................. 3.31% 3.56% (0.25%) 3.37% 3.52% (0.15%)
Efficiency Ratio (FTE).................... 60.86% 60.37% 0.49% 59.96% 60.83% (0.87%)
(A) All ratios have been adjusted to exclude restructuring charges.
Quarter Ended June 30, Six Months Ended June 30,
Percent Percent
Income Statement 2000 1999 Change 2000 1999 Change
- -----------------------------------------------------------------------------------------------------------------------
Interest income............................. $80,823 $ 73,902 9.4% $ 159,755 $ 146,794 8.8%
Interest expense............................ 48,798 41,240 18.3% 94,768 82,349 15.1%
-------------------------------------------------------------------------
Net interest income...................... 32,025 32,662 (2.0%) 64,987 64,445 0.8%
Provision for loan losses................... 2,340 2,151 8.8% 4,730 4,377 8.1%
Non-interest income:
Trust and asset management income........ 7,553 7,709 (2.0%) 15,175 14,296 6.1%
Service charges on deposits.............. 2,781 2,408 15.5% 5,395 4,626 16.6%
Mortgage revenues........................ 1,179 2,110 (44.1%) 2,120 4,694 (54.8%)
Other.................................... 2,922 2,621 11.5% 5,779 5,247 10.1%
-------------------------------------------------------------------------
Total non-interest income............. 14,435 14,848 (2.8%) 28,469 28,863 (1.4%)
Net security gains.......................... 393 379 3.7% 1,096 572 91.6%
Operating expenses:
Personnel costs.......................... 17,076 17,140 (0.4%) 33,289 33,865 (1.7%)
Net occupancy expense.................... 1,715 1,622 5.7% 3,552 3,351 6.0%
Equipment expense........................ 2,181 2,463 (11.4%) 4,464 4,568 (2.3%)
External data processing expense......... 1,484 1,492 (0.5%) 3,076 3,093 (0.5%)
Professional fees........................ 1,125 866 29.9% 2,133 1,997 6.8%
Advertising and business development..... 1,159 1,017 14.0% 2,142 1,763 21.5%
Amortization of intangible assets........ 529 498 6.2% 1,057 995 6.2%
Other.................................... 4,845 5,447 (11.1%) 10,071 10,717 (6.0%)
-------------------------------------------------------------------------
Total operating expenses.............. 30,114 30,545 (1.4%) 59,784 60,349 (0.9%)
-------------------------------------------------------------------------
Income before income taxes.................. 14,399 15,193 (5.2%) 30,038 29,154 3.0%
Income taxes................................ 3,859 4,300 (10.3%) 8,411 8,225 2.3%
-------------------------------------------------------------------------
Net income from operations.................. $10,540 $ 10,893 (3.2%) $ 21,627 $ 20,929 3.3%
Restructuring charges, net of tax (141) 3,767 N/M (141) 3,767 N/M
-------------------------------------------------------------------------
Net income.................................. $10,681 $ 7,126 49.9% $ 21,768 $ 17,162 26.8%
-------------------------------------------------------------------------
Average shares outstanding - basic (000).... 27,101 28,252 (4.1%) 27,289 28,363 (3.8%)
Average shares outstanding - diluted (000).. 27,421 28,659 (4.3%) 27,625 28,800 (4.1%)
Ending shares outstanding (000)............. 27,112 28,289 (4.2%)
AMCORE Financial, Inc.
Quarter Ended June 30,
-----------------------------------------------------
2000 1999
---------------------------------------------------------------------
(in thousands) Ending Average Yield/ Average Yield/
Balance Balance Rate Balance Rate
- -----------------------------------------------------------------------------------------------------------------------
Assets:
Taxable securities........................... $ 928,101 $ 1,009,833 6.91% $ 1,012,840 6.28%
Tax-exempt securities (FTE).................. 300,517 301,804 7.69% 348,253 7.66%
Other earning assets......................... 40,545 14,671 6.67% 23,538 4.14%
Loans held for sale.......................... 43,420 18,925 8.60% 19,449 6.60%
Loans, net of unearned income (FTE).......... 2,778,933 2,790,074 8.50% 2,556,142 8.33%
---------------------------------------------------------------------
Total Earning Assets (FTE)................ $4,091,516 $ 4,135,307 8.06% $ 3,960,222 7.73%
Intangible assets......................... 17,732 17,964 18,328
Other non-earning assets.................. 283,128 207,373 221,950
---------------------------------------------------------------------
Total Assets.............................. $4,392,376 $ 4,360,644 $ 4,200,500
---------------------------------------------------------------------
Liabilities and Stockholders' Equity:
Interest bearing deposits.................... $2,731,765 $ 2,739,555 5.04% $ 2,552,137 4.45%
Non-interest bearing deposits................ 382,521 362,948 366,461
---------------------------------------------------------------------
Total Deposits............................ $3,114,286 $ 3,102,503 $ 2,918,598
---------------------------------------------------------------------
Short-term borrowings........................ 599,385 584,238 6.31% 615,877 5.70%
Long-term borrowings......................... 335,734 336,150 6.32% 297,421 5.65%
---------------------------------------------------------------------
Total Interest Bearing Liabilities........ 3,666,884 3,659,943 5.36% 3,465,435 4.77%
Other liabilities......................... 55,552 55,077 54,688
---------------------------------------------------------------------
Total Liabilities......................... $4,104,957 $ 4,077,968 $ 3,886,584
Stockholders' Equity...................... 287,419 282,676 313,916
---------------------------------------------------------------------
Total Liabilities and
Stockholders' Equity...................... $4,392,376 $ 4,360,644 $ 4,200,500
---------------------------------------------------------------------
Six Months Ended June 30,
-------------------------------------------------
2000 1999
-------------------------------------------------
(in thousands) Average Yield/ Average Yield/
Balance Rate Balance Rate
- ---------------------------------------------------------------------------------------------------
Assets:
Taxable securities........................... $1,009,408 6.93% $ 1,040,783 6.20%
Tax-exempt securities (FTE).................. 302,973 7.69% 343,387 7.74%
Other earning assets......................... 16,868 6.09% 20,301 3.99%
Loans held for sale.......................... 14,615 8.16% 25,705 5.78%
Loans, net of unearned income (FTE).......... 2,774,538 8.42% 2,519,854 8.37%
-------------------------------------------------
Total Earning Assets (FTE)................ $4,118,402 8.00% $ 3,950,030 7.72%
Intangible assets......................... 17,939 18,540
Other non-earning assets.................. 204,808 216,860
-------------------------------------------------
Total Assets.............................. $4,341,149 $ 4,185,430
-------------------------------------------------
Liabilities and Stockholders' Equity:
Interest bearing deposits.................... $2,720,030 4.93% $ 2,547,081 4.49%
Non-interest bearing deposits................ 363,274 359,514
-------------------------------------------------
Total Deposits............................ $3,083,304 $ 2,906,595
-------------------------------------------------
Short-term borrowings........................ 601,985 6.10% 598,628 5.71%
Long-term borrowings......................... 315,805 6.24% 307,769 5.71%
-------------------------------------------------
Total Interest Bearing Liabilities........ 3,637,820 5.24% 3,453,478 4.81%
Other liabilities......................... 56,053 55,873
-------------------------------------------------
Total Liabilities......................... $4,057,147 $ 3,868,865
Stockholders' Equity...................... 284,002 316,565
-------------------------------------------------
Total Liabilities and
Stockholders' Equity...................... $4,341,149 $ 4,185,430
-------------------------------------------------
----------------------------------------------------------------
Quarter Ended
----------------------------------------------------------------
June 30, Percent December 31, Percent
Asset Quality (in thousands) 2000 1999 Change 1999 Change
----------------------------------------------------------------
Ending allowance for loan losses.................. $ 30,132 $ 27,636 9.0% 28,377 6.2%
Net charge-offs................................... 1,374 2,434 (43.5%) 3,618 (62.0%)
Net charge-offs to average loans (B).............. 0.20% 0.38% (0.18%) 0.53% (0.33%)
Non-performing assets:
Non-performing loans - nonaccrual.............. $ 29,204 $ 17,618 65.8% $ 17,235 69.4%
Other real estate owned (OREO)................. 2,256 3,090 (27.0%) 2,675 (15.7%)
Other foreclosed assets........................ 1,666 503 231.2% 1,226 35.9%
----------------------------------------------------------------
Total non-performing assets................. $ 33,126 $ 21,211 56.2% $ 21,136 56.7%
----------------------------------------------------------------
Loans 90 days past due and still accruing......... $ 10,948 $ 7,042 55.5% $ 10,197 7.4%
-----------------------------------
Six Months Ended June 30,
-----------------------------------
Percent
Asset Quality (in thousands) 2000 1999 Change
-----------------------------------
Ending allowance for loan losses..................
Net charge-offs................................... 2,975 3,144 (5.4%)
Net charge-offs to average loans (B).............. 0.22% 0.25% (0.03%)
Non-performing assets:
Non-performing loans - nonaccrual..............
Other real estate owned (OREO).................
Other foreclosed assets........................
Total non-performing assets.................
Loans 90 days past due and still accruing.........
(B) On an annualized basis.
June 30,
Key Asset Quality Ratios 2000 1999 Change
- ----------------------------------------------------------------------------------------
Allowance to ending loans...................... 1.08% 1.07% 0.01%
Allowance to non-performing loans.............. 103.18% 156.86% (53.68%)
Non-performing loans to loans.................. 1.05% 0.68% 0.37%
Non-performing assets to loans & OREO.......... 1.19% 0.82% 0.37%
Non-performing assets to total assets.......... 0.75% 0.50% 0.25%
Capital Adequacy
- ----------------------------------------------------------------------------------------
Total risk-based capital........................ 12.31% 12.85% (0.54%)
Tier 1 risk-based capital....................... 11.30% 11.88% (0.58%)
Leverage ratio.................................. 7.81% 8.05% (0.24%)