Exhibit 99.1
October 22, 2002
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 THIRD QUARTER EPS OF 43 CENTS
FlashResults
AMCORE Financial, Inc. (Nasdaq: AMFI)
(Numbers in Thousands, Except Per Share Data)
3rd quarter ended YTD 3rd quarter ended YTD
09/30/02 09/30/01
Net Revenues $51,554 $147,048 $48,697 $145,911
Net Income $10,683 $ 31,192 $10,743 $ 30,699
Average Shares 24,923 24,899 25,640 25,966
EPS $0.43 $1.25 $0.42 $1.18
ROCKFORD, IL -- AMCORE Financial, Inc. (Nasdaq: AMFI) reported diluted
earnings per share for third quarter 2002 of $0.43, a 2.4 percent increase,
compared to $0.42 per diluted share in the third quarter of 2001. Net income for
the third quarter was essentially flat at $10.7 million compared to the
prior-year period. Asset quality, especially non-performing loans as a
percentage of total loans, improved compared to both the same period a year ago
and the previous quarter.
Commenting on AMCORE's results, Kenneth E. Edge, president and chief
executive officer, said: "Third quarter results were strong and showed
significant growth in deposits and loan volumes as well as improvements in asset
quality. Especially gratifying is the third quarter's earnings growth despite
significant additional costs associated with the branch expansion program and
other charges associated with mortgage servicing rights impairment and the
accrual of early retirement obligations for the former Chief Executive Officer."
Highlights
----------
o Net interest income increased 13 percent to $33.9 million from $29.9
million a year ago.
o The net interest margin improved 6 basis points to 3.55 percent from
3.49 percent during the same period in 2001 and improved 4 basis
points from 3.51 percent at June 30, 2002.
o Loan balances grew 11 percent from a year ago and were up 15 percent
on an annualized basis from the second quarter.
o Total non-interest income, excluding the $1.8 million gain on branch
sales and a $1 million gain from cash received on the merger of an ATM
service provider in third quarter 2001, increased 6 percent or
$904,000.
o Provisions for loan losses decreased $1.3 million compared to a year
ago due to improving 90- day past due loans and lower charge-offs.
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o Total non-performing loans as a percentage of loans decreased to 0.99
percent, down from 1.07 percent at September 30, 2001 and 1.10 percent
at June 30, 2002.
o New branches opened since April 2001 have contributed total loans of
$165 million and total deposits of $53 million at September 30, 2002.
Third Quarter Results
---------------------
Net interest income in the third quarter 2002 was up 13 percent from a year
ago, or $4.0 million, due to strong loan growth and improvement in the net
interest spread caused by a sharp decline in total funding costs. The net
interest margin increased to 3.55 percent, a 6 basis point increase from 3.49
percent during the same quarter a year ago and a 4 basis point increase from
3.51 percent in the second quarter of 2002.
Provisions for loan losses declined $1.3 million, or 28 percent, due to
lower 90-day past due and still accruing loans and lower charge-offs compared to
third quarter 2001. The 90-day past due and still accruing loans were down 58
percent or $10.4 million compared to a year ago.
Average loans rose $247 million to $2.7 billion, a 10 percent increase from
the third quarter of 2001. The growth was due to increases of $162 million in
consumer loans, principally indirect automobile lending, and $156 million in
commercial lending driven by expansion into the Chicago suburban markets and
Madison.
Partially offsetting this growth was a $71 million, or 18 percent, decline
in 1-to-4 family real estate loans. These loans declined due to the impact of
refinancing in this historically low mortgage interest rate environment. The
high level of refinance activity is expected to continue in the fourth quarter
of 2002, which will continue to reduce the 1-to-4 family portfolio.
This interest rate environment has also increased the level of prepayment
of mortgage-related securities in the investment portfolio. Continued
refinancing activity will impact both the balances and the yields earned on
these securities. "The extended period of mortgage rate declines is likely to
diminish yields on our mortgage-related assets and generate substantial cash
inflows that we intend to redirect to finance loan growth associated with our
branch expansion strategy," said Edge. "We are fortunate to have quality loan
growth opportunities to put our investment cash flow to good use."
During the fourth quarter of 2002, the expiration of two interest rate
swaps is expected to benefit net interest income and margins. During the third
quarter, the expiring swaps had a net cost of $1.5 million and a 15 basis point
impact to the net interest margin. "We expect to see a $700,000 reduction in
costs associated with these swaps in the fourth quarter compared to third
quarter 2002," said Edge.
Average deposits grew to $3.2 billion, an increase of 11 percent, or $308
million, compared to a year ago. This growth reflects aggressive company-wide
efforts to attract additional core deposits, which increased $168 million due to
an emphasis on primary transaction account business. As a result of the growth
from the deposit initiatives, service charge income has increased 24 percent
compared to the third quarter 2001.
Total non-interest income decreased 11 percent, or $1.9 million, compared
to the same period a year ago. The decrease was mainly due to a $1.8 million
gain on branch sales and a $1 million gain from cash received on the merger of
an ATM service provider in third quarter 2001. Excluding the gain on branch
sales and the cash from the ATM merger, non-interest income would have increased
$904,000, or 6 percent.
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During the third quarter of 2002, the Company recognized impairment charges
for mortgage servicing rights of $1.7 million, an increase of $816,000 over the
same period a year ago. The total impairment valuation allowance stands at $3.2
million as of September 30, 2002.
Mortgage revenues increased 49 percent, or $442,000, despite the $816,000
increase in impairment charges for mortgage servicing rights due to increasing
prepayment speeds. During the third quarter, mortgage applications totaled $395
million compared to $189 million during the same quarter a year ago. Mortgage
closings totaled $206 million for third quarter 2002, a 75 percent increase from
the same period a year ago. Of the total third quarter closings, 73 percent were
due to refinancings.
Trust and asset management revenues decreased $808,000, or 12 percent, to
$5.9 million in third quarter 2002. Declines in the equity markets, especially
the S&P 500 index, impacted the value of AMCORE-managed assets, which in turn,
caused a reduction in fee revenue. Assets under administration totaled $5.6
billion as of the end of the quarter, including $916 million in the Vintage
Mutual Funds and $1.2 billion of the bank's investment portfolio.
Net security gains rose $835,000 for the third quarter 2002 to $1.1 million
compared to $309,000 during the same period a year ago. "The proceeds from the
security sales are helping to fund our loan growth as we expand our business
into the Chicago suburbs and Madison," said Edge.
Total operating expenses increased 16 percent, or $4.8 million, to $34.2
million in third quarter 2002 from a year ago. The increase is due to a $3.1
million increase in personnel costs, of which $1.3 million, or $0.03 per share,
relates to charges due to the retirement of the former CEO. Also impacting
expenses are the costs associated with the new branches of $854,000 and variable
expenses such as commissions and loan processing costs relating to higher
mortgage volumes. The impact of the branching strategy, including net revenues
and loan loss provisions, was dilution of $0.01 per share for the quarter and
$0.03 per share for the nine months ended September 30, 2002. "In 2003, AMCORE's
branch expansion program is expected to result in earnings dilution of $0.10 to
$0.15 as start-up costs initially outpace net revenues. The level of this
dilution will drive the pace of new branch openings in 2003," Edge said.
Third quarter 2001 included $486,000, or approximately $0.02 per share of
goodwill amortization. Amortization of goodwill was discontinued pursuant to
SFAS No. 142, an accounting standard effective January 1, 2002. The year-to-date
2001 goodwill amortization was $1.5 million or $0.06 per share. No transition
impairment charge was required and no impairment for the year is expected.
Asset Quality & Reserves
------------------------
Total non-performing assets increased 3.4 percent, or $1.1 million, from
September 30, 2001 and decreased $2.6 million, or 7.5 percent, from June 30,
2002. Loans 90 days past due and still accruing decreased $10.4 million, or 58
percent, from the same period a year ago and increased $2.1 million, or 38
percent, from June 30, 2002. Total non-performing assets to total assets
declined to 0.72 percent at September 30, 2002 from 0.77 percent at September
30, 2001 and 0.81 percent at June 30, 2002.
Net charge-offs were $3.2 million, a decrease of $236,000 from third
quarter 2001and an increase of $792,000 from the second quarter 2002. Net
charge-offs were 46 basis points of average loans on an annualized basis during
third quarter 2002. This compares to 54 basis points and 37 basis points,
respectively, for third quarter 2001 and second quarter 2002.
Total non-performing loans as a percentage of loans fell to 0.99 percent at
September 30, 2002 down from 1.07 percent at September 30, 2001 and 1.06 percent
at June 30, 2002. The allowance for loan losses, as a percentage of ending
loans, decreased to 1.24 percent from 1.38 percent at September 30, 2001 and
1.27 percent at June 30, 2002. The allowance to non-performing loans was 124
percent compared to 129 percent at September 30, 2001 and 120 percent at June
30, 2002.
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Branching Update
----------------
During the third quarter, AMCORE opened two commercial loan offices, one at
4600 American Parkway, Madison, WI. and one at 300 Tri-State International,
Lincolnshire, IL. During the fourth quarter, AMCORE will open three offices in
the Illinois cities of St. Charles, McHenry and Des Plaines. In 2003 and early
2004, the Company plans to open an additional nine branches in the Chicago
suburbs and Madison. This will bring the total number of AMCORE offices to 75,
with 39 located along the I-90 corridor.
AMCORE Financial, Inc. focuses on delivering high performance asset
management and tailored financial business products to customers in selected
high growth Midwestern markets. The Company is headquartered in Northern
Illinois with investment assets under administration of $5.6 billion, including
$1.2 billion of the bank's investment portfolio, and banking assets of $4.4
billion with 64 locations in Illinois, Wisconsin and Iowa.
In addition to its banking subsidiary, the company has two financial
services companies: AMCORE Mortgage, Inc. and AMCORE Investment Group. AMCORE
Mortgage provides a variety of mortgage lending products and services to
individuals. AMCORE Investment Group provides the following services: trust,
brokerage, capital management, mutual fund administration, employee benefit plan
record keeping 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) 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 policies": (XVII) inability of third-party vendors to perform
critical services to the company or its customer.; and, (XVIII) the economic
impact of the terrorist attacks on the U.S. on September 11 and the U.S.
response to those attacks.
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 www.AMCORE.com and at www.VintageFunds.com.
4 of 4
AMCORE Financial, Inc.
CONSOLIDATED KEY FINANCIAL DATA SUMMARY
(dollars in thousands, Quarter Ended Nine Months Ended Trailing Twelve Months Ended
except per share data) --------------------------------------------------------------------------------------------
September 30, Percent June 30, September 30, Percent September 30, Percent
Key Financial Highlights & Ratios 2002 2001 Change 2002 2002 2001 Change 2002 2001 Change
- ----------------------------------------------------------------------------------------------------------------------------------
Net revenues......................... $51,554 $48,697 5.9% $48,207 $147,048 $145,911 0.8% $198,076 $191,322 3.5%
Net interest income (FTE)............ 35,563 31,880 11.6% 33,952 101,508 94,556 7.4% 134,884 125,860 7.2%
Operating expenses................... 34,249 29,412 16.4% 31,493 97,173 90,601 7.3% 130,207 119,529 8.9%
Net income........................... 10,683 10,743 (0.6%) 10,583 31,192 30,699 1.6% 42,736 41,210 3.7%
Diluted earnings per share........... 0.43 0.42 2.4% 0.42 1.25 1.18 5.9% 1.71 1.58 8.2%
Cash dividends per share............. 0.16 0.16 0.0% 0.16 0.48 0.48 0.0% 0.64 0.64 0.0%
Book value per share................. 14.15 12.55 12.7% 13.39
Shares outstanding (in thousands)
Average diluted................... 24,923 25,640 (2.8%) 24,926 24,899 25,966 (4.1%)
Ending............................ 24,762 24,962 (0.8%) 24,699
Return on average assets............. 0.97% 1.10% (0.13%) 1.01% 1.00% 1.01% (0.01%)
Return on realized equity............ 13.15% 13.74% (0.59%) 13.58% 13.31% 13.18% 0.13%
Net interest margin (FTE)............ 3.55% 3.49% 0.06% 3.51% 3.52% 3.35% 0.17%.
Efficiency Ratio (FTE) (A)........... 60.90% 60.30% 0.60% 62.73% 62.41% 61.86% 0.55%
(A) Ratio also excludes branch gains, portfolio restructuring and severance
expense.
Quarter Ended Nine Months Ended
----------------------------------------------------------------------------------
September 30, Percent June 30, September 30, Percent
Income Statement 2002 2001 Change 2002 2002 2001 Change
- --------------------------------------------------------------------------------------------------------------------------------
Interest income............................. $65,282 $68,368 (4.5%) $63,816 $189,809 $216,101 (12.2%)
Interest expense............................ 31,424 38,476 (18.3%) 31,623 93,579 127,748 (26.7%)
----------------------------------------- ----------------------------------
Net interest income...................... 33,858 29,892 13.3% 32,193 96,230 88,353 8.9%
Provision for loan losses................... 3,360 4,656 (27.8%) 2,653 8,653 14,369 (39.8%)
Non-interest income:
Trust & asset management income.......... 5,929 6,737 (12.0%) 6,189 18,808 20,354 (7.6%)
Service charges on deposits.............. 4,882 3,950 23.6% 4,113 12,862 10,758 19.6%
Mortgage revenues........................ 1,340 898 49.2% 499 3,684 4,194 (12.2%)
Company owned life insurance income...... 1,458 1,505 (3.1%) 1,469 4,184 3,935 6.3%
Gain on branch sales..................... - 1,803 N/M - - 10,498 N/M
Other.................................... 2,943 3,603 (18.3%) 3,119 8,777 9,039 (2.9%)
----------------------------------------- ----------------------------------
Total non-interest income............. 16,552 18,496 (10.5%) 15,389 48,315 58,778 (17.8%)
Net security gains (losses)................. 1,144 309 270.2% 625 2,503 (1,220) 305.2%
Operating expenses:
Personnel costs.......................... 19,963 16,838 18.6% 18,257 56,432 50,967 10.7%
Net occupancy expense.................... 2,034 1,825 11.5% 1,948 5,883 5,685 3.5%
Equipment expense........................ 2,036 1,818 12.0% 1,932 5,820 5,992 (2.9%)
Data processing expense.................. 1,624 1,516 7.1% 1,616 4,885 4,518 8.1%
Professional fees........................ 1,112 732 51.9% 1,074 3,207 2,884 11.2%
Advertising & business development....... 1,095 1,021 7.2% 1,145 3,486 3,146 10.8%
Amortization of intangible assets........ 35 510 (93.1%) 36 106 1,595 (93.4%)
Communication expense.................... 999 929 7.5% 1,027 3,058 2,976 2.8%
Other.................................... 5,351 4,223 26.7% 4,458 14,296 12,838 11.4%
----------------------------------------- ----------------------------------
Total operating expenses.............. 34,249 29,412 16.4% 31,493 97,173 90,601 7.3%
----------------------------------------- ----------------------------------
Income before income taxes.................. 13,945 14,629 (4.7%) 14,061 41,222 40,941 0.7%
Income taxes................................ 3,262 3,682 (11.4%) 3,478 10,030 10,263 (2.3%)
----------------------------------------- ----------------------------------
Net income from operations.................. $10,683 $10,947 (2.4%) $10,583 $31,192 $30,678 1.7%
Extinguishment of debt, net of tax.......... - (204) N/M - - (204) N/M
Accounting change, net of tax............... - - N/M - - 225 N/M
----------------------------------------- ----------------------------------
Net income.................................. $10,683 $10,743 (0.6%) $10,583 $31,192 $30,699 1.6%
========================================= ==================================
Segment Earnings
Commercial Banking........................ $ 5,988 $ 3,271 83.1% $ 5,566 $16,445 $10,830 51.8%
Retail Banking........................... 2,069 2,791 (25.9%) 2,928 7,242 6,003 20.6%
Trust & Asset Management.................. 835 899 (7.1%) 927 2,733 2,726 0.3%
Mortgage Banking.......................... 13 208 (93.8%) (180) 377 1,230 (69.3%)
Other..................................... 1,778 3,574 (50.3%) 1,342 4,395 9,910 (55.7%)
----------------------------------------- ----------------------------------
Total Segments.............................. $10,683 $10,743 (0.6%) $10,583 $31,192 $30,699 1.6%
========================================= ==================================
AMCORE Financial, Inc.
Quarter Ended September 30, Nine Months Ended September 30,
--------------------------------------------------------------------------
2002 2001 2002 2001
--------------------------------------------------------------------------
(dollars in thousands) Ending Average Yield/ Average Yield/ Average Yield/ Average Yield/
Balance Balance Rate Balance Rate Balance Rate Balance Rate
- -----------------------------------------------------------------------------------------------------------------------------------
Assets:
Taxable securities...................... $ 975,976 $ 974,690 5.54% $ 834,924 6.45% $ 934,409 5.66% $887,045 6.67%
Tax-exempt securities (FTE)............. 224,398 239,489 7.47% 264,719 7.75% 239,401 7.53% 277,135 7.70%
Other earning assets.................... 6,115 10,506 1.47% 27,707 3.44% 15,802 1.55% 27,557 4.60%
Loans held for sale..................... 83,832 46,728 5.42% 43,017 6.97% 41,928 6.09% 39,882 6.89%
Gross loans (FTE)....................... 2,767,277 2,727,838 6.95% 2,480,371 8.07% 2,614,464 7.08% 2,534,131 8.32%
--------------------------------------------------------------------------------------
Total Earning Assets (FTE)........... $4,057,598 $3,999,251 6.67% $3,650,738 7.67% $3,846,004 6.77% $3,765,750 7.88%
Intangible assets....................... 15,821 15,838 16,680 15,876 17,159
Other non-earning assets................ 349,067 333,657 298,501 318,228 292,120
--------------------------------------------------------------------------------------
Total Assets............................... $4,422,486 $4,348,746 $3,965,919 $4,180,108 $4,075,029
--------------------------------------------------------------------------------------
Liabilities & Stockholders' Equity:
Interest bearing deposits............... $2,852,155 $2,812,893 3.25% $2,526,311 4.53% $2,683,799 3.38% $2,608,881 4.90%
Non-interest bearing deposits........... 377,632 360,049 338,327 355,474 342,988
--------------------------------------------------------------------------------------
Total Deposits....................... 3,229,787 3,172,942 2,864,638 3,039,273 2,951,869
--------------------------------------------------------------------------------------
Short-term borrowings................... 568,213 546,622 3.77% 423,805 4.92% 526,039 4.00% 440,880 5.65%
Long-term borrowings.................... 184,785 210,996 5.94% 291,464 5.97% 222,385 5.94% 295,568 6.06%
--------------------------------------------------------------------------------------
Total Interest Bearing Liabilities... $3,605,153 $3,570,511 3.49% $3,241,580 4.71% $3,432,223 3.65% $3,345,329 5.11%
Other liabilities....................... 89,398 79,926 70,974 70,028 73,528
--------------------------------------------------------------------------------------
Total Liabilities.................... $4,072,183 $4,010,486 $3,650,881 $3,857,725 $3,761,845
Stockholders' Equity................. 350,303 338,260 315,038 322,383 313,184
--------------------------------------------------------------------------------------
Total Liabilities & Stockholders' Equity... $4,422,486 $4,348,746 $3,965,919 $4,180,108 $4,075,029
======================================================================================
Quarter Ended Nine Months Ended
--------------------------------------------------------------------------------------
September 30, Percent June 30, Percent September 30, Percent
Asset Quality 2002 2001 Change 2002 Change 2002 2001 Change
- ----------------------------------------------------------------------------------------------------------------------------------
Ending allowance for loan losses........... $ 34,177 $ 34,137 0.1% $ 33,986 0.6%
Net charge-offs............................ 3,169 3,405 (6.9%) 2,377 33.3% $ 8,416 $ 8,510 (1.1%)
Net charge-offs to average loans (B)....... 0.46% 0.54% (0.08%) 0.37% 0.09% 0.43% 0.45% (0.02%)
Non-performing assets:
Non-performing loans - nonaccrual....... $ 27,501 $ 26,537 3.6% $ 28,369 (3.1%)
Foreclosed real estate (OREO)........... 3,118 3,076 1.4% 3,844 (18.9%)
Other foreclosed assets................. 1,362 1,315 3.6% 2,358 (42.2%)
-----------------------------------------------------
Total non-performing assets.......... $ 31,981 $ 30,928 3.4% $ 34,571 (7.5%)
=====================================================
Loans 90 days past due & still accruing.... $ 7,564 $ 17,995 (58.0%) $ 5,479 38.1%
(B) On an annualized basis.
September 30, June 30,
Key Asset Quality Ratios 2002 2001 2002
- ------------------------------------------------------------------------------
Allowance to ending loans............... 1.24% 1.38% 1.27%
Allowance to non-performing loans....... 124.28% 128.64% 119.80%
Non-performing loans to loans........... 0.99% 1.07% 1.06%
Non-performing assets to loans & OREO... 1.15% 1.24% 1.29%
Non-performing assets to total assets... 0.72% 0.77% 0.81%
Capital Adequacy
- ------------------------------------------------------------------------------
Total risk-based capital................. 10.93% 11.76% 11.25%
Tier 1 risk-based capital................ 9.91% 10.60% 10.18%
Leverage ratio........................... 7.73% 7.86% 7.79%