EXHIBIT 99.1
October 14, 2003
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 RECORD THIRD QUARTER EPS
(000's, Except Per Share Data)
Quarters Ended September 30, 2nd Quarter
2003 2002 2003
---- ---- ----
Net Revenues $55,986 $51,263 $55,604
Net Income $11,680 $10,683 $11,227
Diluted Shares 25,100 24,923 25,054
Diluted EPS $0.47 $0.43 $0.45
ROCKFORD, IL -- AMCORE Financial, Inc. (Nasdaq: AMFI) reported record third
quarter diluted earnings per share of $0.47 for 2003, a 9 percent increase
compared to $0.43 per share in third quarter 2002. Net income in the third
quarter of 2003 was $11.7 million, a 9 percent, or $997,000 increase from the
$10.7 million in the prior-year period. Return on average equity was 12.70
percent for third quarter 2003 compared to 12.53 percent for third quarter 2002.
"One key driver during the quarter was the record number of mortgage
closings, which contributed to a $7.0 million increase in mortgage revenues from
a year ago," said Kenneth E. Edge, Chairman, President and CEO of AMCORE.
"Though much of the result was due to refinancing, we are especially pleased
with the volume of new home purchases in our mortgage business, which grew 52
percent from a year ago and is a direct result of loan originations from our new
branches in the higher growth markets in the Chicago suburbs and Madison, WI."
Highlights
----------
o Non-interest income rose to $23.0 million, a 32 percent increase from third
quarter 2002 and was driven by a significant increase in mortgage revenues.
o Net interest income decreased 3 percent to $33.0 million from $33.9 million
a year ago. The net interest margin decreased 22 basis points to 3.33
percent in third quarter 2003 from 3.55 percent during the same period in
2002.
o Average loan balances grew 6 percent from a year ago, despite the sale of
indirect automobile loans totaling $106 million, the March 2003 sale of six
Wisconsin branches that included the transfer of $48 million in loans and
the impact of refinancing on our residential real estate portfolio.
o Average bank-issued deposits increased 6 percent from a year ago. This
growth was achieved despite the transfer of $125 million in deposits with
the Wisconsin branch sales.
o Wholesale funding was reduced by over $100 million on average from a year
ago.
o Allowance for loan losses, as a percentage of ending loans, remained steady
at 1.46 percent when compared to the prior quarter, and increased from 1.24
percent during the same period a year ago.
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Third Quarter Results
---------------------
Net interest income in third quarter 2003 decreased 3 percent from a year
ago, or $833,000. The net interest margin decreased 22 basis points to 3.33
percent compared to 3.55 percent in third quarter 2002. "The drop in net
interest income was driven largely by a sharp reduction in investment yields,
principally mortgage-backed securities that experienced accelerated amortization
of premiums due to a record level of prepayments and lower reinvestment rates,"
said Edge. "We maintained a shorter duration in our investment portfolio to
protect against an extension risk and to provide liquidity to fund loan demand
from our branch expansion."
"In addition, we experienced strong demand from borrowers opting for
floating rate loan terms. This has lowered the yield on our commercial loan
portfolio. The increasing shift to variable rates intensified the impact of the
Federal Reserve's June 25th rate cut, which lowered our floating rate yields by
25 basis points for the entire quarter. Given the difficulty of lowering deposit
costs below floor levels commensurate with the short end of the yield curve,
total funding costs were not able to respond down in the same proportion as our
asset repricing. Consequently, spreads were compressed and our interest rate
exposure has changed to a more asset sensitive position," said Edge.
Provision for loan losses increased 29 percent, or $958,000, from the same
period a year ago. Total non-performing loans, including loans 90 days past due
and still accruing interest, increased $1.3 million, or 3 percent, compared to
second quarter 2003 and increased $5.8 million, or 17 percent, compared to third
quarter 2002.
Average loans rose $163 million to $2.9 billion, a 6 percent increase from
third quarter 2002. The growth came from increases of $254 million in average
commercial real estate loans driven by AMCORE's expansion in suburban Chicago
and Madison markets. This growth was achieved despite continuing prepayment of
1-to-4 family real estate loans, which decreased 21 percent, or $100 million on
average.
Average bank-issued deposits grew to $2.9 billion, an increase of 6
percent, or $162 million, compared to a year ago. This growth was achieved even
with the transfer of $125 million in deposits related to the Wisconsin branch
sales in the first quarter of this year. "Our deposit initiative continues to
contribute favorably to our results, especially with our focus on transaction
deposits," said Edge. "This supports a favorable shift from more expensive time
deposits and wholesale funding to lower cost funding sources. Phase II of our
branching strategy will continue to emphasize core deposit and household
relationship growth."
Total non-interest income increased 32 percent, or $5.6 million, compared
to the same period a year ago. An increase in mortgage loan activity was
responsible for the growth in non-interest income revenue. Mortgage revenues
increased $7.0 million, compared to the prior-year period. "Record volume
combined with a slow down in prepayment activity toward the end of the quarter
helped drive mortgage revenues," said Edge.
Of the $7.0 million increase, $4.1 million was due to the recapture of
mortgage servicing right impairment reserves in the current period compared to
an impairment charge of $1.7 million in the previous year which resulted in a
$5.8 million change year over year in the third quarter. "While much of the
mortgage activity has been due to refinancing, we have seen significant
increases in new home purchase mortgage business, where dollar volumes increased
52 percent compared to the same quarter a year ago," said Edge. During the third
quarter, mortgage closings totaled $307 million, a 49 percent increase compared
to the $206 million in the same period a year ago. Of total third quarter
closings, 73 percent were due to refinancing.
Trust and asset management revenues decreased $310,000, or 5 percent, to
$5.6 million in third quarter 2003 from the same period a year ago. Lower
AMCORE-managed asset values combined with a
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shift to a higher mix of fixed income and money market assets contributed to the
reduction in fee revenue. Assets under administration totaled $4.4 billion as of
the end of the quarter.
Total operating expenses increased $1.2 million, or 4 percent in third
quarter 2003 from a year ago. The increase was the result of variable costs
related to record mortgage production and the Company's branch expansion
initiative. The Company also began to see cost reductions in the core bank's
data processing systems, which decreased 31 percent, or $502,000, from the same
period a year ago.
Asset Quality & Reserves
------------------------
Total non-performing loans increased $1.3 million from June 30, 2003 and
increased $5.8 million from the third quarter a year ago. The increase from June
30, 2003 can be attributed to an increase in non-performing consumer loans and
mortgages. Total non-performing assets, which includes non-performing loans,
foreclosed real estate and other repossessed assets, increased $2.6 million, or
6 percent, from June 30, 2003, and increased 19 percent, or $7.3 million, from
September 30, 2002. Total non-performing assets to total assets was 1.06 percent
at September 30, 2003, up from 0.98 percent at June 30, 2003, and up from 0.89
percent at September 30, 2002.
Total non-accrual loans as a percentage of loans increased from 1.00
percent at June 30, 2003 to 1.18 percent at September 30, 2003 and was up from
0.99 percent at September 30, 2002. The allowance for loan losses, as a
percentage of ending loans, remained stable at 1.46 percent compared to June 30,
2003 and increased from 1.24 percent at September 30, 2002. The allowance to
non-accrual loans was 124 percent compared to 147 percent at June 30, 2003 and
124 percent at September 30, 2002.
Net charge-offs were $4.0 million in the third quarter 2003, an increase of
$1.8 million, or 82 percent, from the second quarter 2003 and a $791,000, or 25
percent, increase from the third quarter of 2002. Net charge-offs were 54 basis
points of average loans on an annualized basis during the third quarter 2003
compared to 30 basis points in the second quarter 2003 and 46 basis points for
the third quarter last year.
"We are comfortable with our asset quality performance in this economic
environment," said Edge. "We strengthened our reserves during the year and
dedicated additional resources to work out problem credits. Our 90 day past due
credits decreased nearly 15 percent from a year ago. We expect these efforts to
improve asset quality and to result in lower credit-related costs in future
periods."
Branching Update
----------------
During the third quarter 2003, AMCORE continued to expand its presence in
key cities where it believes significant opportunities exist to increase
revenues. Since the beginning of 2003, AMCORE opened seven new branches, and
scheduled four more for opening by year-end. Three of the 11 branches in 2003
represent upgrades and replacements of existing in-store or limited branch
offices.
Branches opened during the third quarter included full-service branches in
the Illinois cities of South Elgin and Algonquin. Additional branches opened in
October are in Machesney Park and Freeport, IL. The branches opening later this
year will include a limited branch office in Oak Brook, IL, a full-service
facility in Elgin, IL, and two full-service branches in Madison, WI. By 2006,
AMCORE will have added 26 new offices since the beginning of the initiative in
2001. Total offices by the end of 2006 will number 76, two-thirds of which will
be located in high growth markets. (See accompanying chart for details)
The year-to-date earnings impact of the branching strategy was dilution of
4.5 cents per share through September 30, 2003. Total loans outstanding in the
new branches as of period end were $470 million while deposits totaled $205
million. This represents quarterly loan growth of $77 million and quarterly
deposit growth of $86 million since second quarter 2003. Loans and deposits
since third quarter of 2002 totaled $305 million and $158 million, respectively.
"Clearly, the branch expansion initiative is driving strong growth opportunities
on both sides of the balance sheet. We are now beginning to balance the
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funding of loans from our limited branch offices with an increased emphasis on
deposits from both commercial and retail relationships as we move into our next
phase of the branching strategy, said Edge."
AMCORE Branch Expansion Plans
Strategy LBO* Full Serv. In-store Branch Expansion Total Branches
-------- ---- ---------- -------- ---------------- --------------
2001 64
- - Sold branches (7)
+ New branches 1 1 0 2 2
- - Closed, moved to new facility 0 0 0 0 0
Cumulative total 1 1 0 2 59
- -------------------------------------------------------------------------------------------------------------------
2002
+ New branches 4 3 0 7 7
- - Closed, moved to new facility (1) (1) 0 (2) (2)
Cumulative total 4 3 0 7 64
- -------------------------------------------------------------------------------------------------------------------
2003
- - Sold branches (6)
- - Closed in-store (1)
+ New branches 4 7 0 11 11
- - Closed, moved to new facility (1) 0 (2) (3) (3)
Cumulative total 7 10 (2) 15 65
- -------------------------------------------------------------------------------------------------------------------
2004
+ New branches 5 10 0 15 15
- - Closed, moved to new facility (5) 0 (2) (7) (7)
Cumulative total 7 20 (4) 23 73
- -------------------------------------------------------------------------------------------------------------------
2005
+ New branches 1 4 0 5 5
- Closed, moved to new facility (2) 0 0 (2) (2)
Cumulative total 6 24 (4) 26 76
- -------------------------------------------------------------------------------------------------------------------
2006
+ New branches 0 1 0 1 1
- - Closed, moved to new facility (1) 0 0 (1) (1)
Cumulative total 5 25 (4) 26 76
*LBO is a limited branch office.
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AMCORE Financial, Inc. focuses on delivering tailored financial business
products and asset management services to customers in selected Midwestern
markets. The Company is headquartered in Northern Illinois with investment
assets under administration of $4.4 billion, and banking assets of $4.4 billion
with 62 locations in Illinois, Wisconsin and Iowa.
AMCORE provides a full range of consumer and commercial banking services, a
variety of mortgage lending products and investment services including 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, and our periodic filings with the Securities
and Exchange Commission and written or oral statements made by the Company's
officers and directors to the press, potential investors, securities analysts
and others will contain, forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act
of 1934, and the Company intends that such forward-looking statements be subject
to the safe harbors created thereby with respect to, among other things, the
financial condition, results of operations, plans, objectives, future
performance and business of AMCORE. Statements that are not historical facts,
including statements about beliefs and expectations, are forward-looking
statements. These statements are based upon beliefs and assumptions of AMCORE's
management and on information currently available to such management. The use of
the words "believe", "expect", "anticipate", "plan", "estimate", "should",
"may", "will" or similar expressions identify forward-looking statements.
Forward-looking statements speak only as of the date they are made, and AMCORE
undertakes no obligation to update publicly any forward-looking statements in
light of new information or future events.
Contemplated, projected, forecasted or estimated results in such
forward-looking statements involve certain inherent risks and uncertainties. A
number of factors - many of which are beyond the ability of the Company to
control or predict - could cause actual results to differ materially from those
in its forward-looking statements. These factors include, among others, the
following possibilities: (I) heightened competition, including specifically the
intensification of price competition, the entry of new competitors and the
formation of new products by new or existing competitors; (II) adverse state,
local and federal legislation and regulation; (III) failure to obtain new
customers and retain existing customers; (IV) inability to carry out marketing
and/or expansion plans; (V) ability to attract and retain key executives or
personnel; (VI) changes in interest rates including the effect of prepayment;
(VII) general economic and business conditions which are less favorable than
expected; (VIII) equity and fixed income market fluctuations; (IX) unanticipated
changes in industry trends; (X) unanticipated changes in credit quality and risk
factors; (XI) success in gaining regulatory approvals when required; (XII)
changes in Federal Reserve Board monetary policies; (XIII) unexpected outcomes
on existing or new litigation in which AMCORE, its subsidiaries, officers,
directors or employees are named defendants; (XIV) technological changes; (XV)
changes in accounting principles generally accepted in the United States of
America; (XVI) changes in assumptions or conditions affecting the application of
"critical accounting policies"; (XVII) inability of third-party vendors to
perform critical services for the company or its customers; and (XVIII)
disruption of operations caused by the conversion of core bank data processing
systems.
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.
5 of 5
AMCORE Financial, Inc.
CONSOLIDATED FINANCIAL SUMMARY
(Unaudited)
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($ in 000's, except per share data) 3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 3Q '03/'02
SHARE DATA 2003 2003 2003 2002 2002 Incr(Decr)
----------------------------------------------------------------------------------
Diluted earnings $ 0.47 $ 0.45 $ 0.43 $ 0.49 $ 0.43 9.3%
Cash dividends $ 0.17 $ 0.16 $ 0.16 $ 0.16 $ 0.16 6.3%
Book value $ 14.81 $ 14.79 $ 14.56 $ 14.40 $ 14.15 4.6%
Average diluted shares outstanding 25,100 25,054 24,936 24,945 24,923 0.7%
INCOME STATEMENT
Net interest income $ 33,025 $ 35,093 $ 34,516 $ 34,538 $ 33,858 (2.5%)
Provision for loan losses 4,318 4,729 12,575 3,921 3,360 28.5%
Non-interest income:
Trust & asset management 5,619 5,677 5,738 5,899 5,929 (5.2%)
Service charges on deposits 4,751 4,638 4,398 5,007 4,882 (2.7%)
Mortgage revenues 8,053 3,435 3,998 4,552 1,049 667.7%
Company owned life insurance 1,753 1,693 1,783 1,500 1,458 20.2%
Gain on sale of loans/branches -- -- 10,723 -- -- N/A
Net security gains -- 2,012 273 -- 1,144 (100.0%)
Other 2,785 3,056 2,518 2,832 2,943 (5.4%)
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Total non-interest income 22,961 20,511 29,431 19,790 17,405 31.9%
Operating expenses:
Personnel costs 20,591 19,900 20,491 20,269 19,963 3.1%
Net occupancy and equipment 4,624 4,062 4,588 3,958 4,070 13.6%
Data processing 1,122 1,635 1,790 1,898 1,624 (30.9%)
Professional fees 1,134 1,207 1,062 1,055 1,112 2.0%
Advertising & business development 1,204 1,212 1,045 1,228 1,095 10.0%
Communication expense 1,174 1,030 1,201 1,070 999 17.5%
Other 5,333 6,340 6,826 4,660 5,095 4.7%
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Total operating expenses 35,182 35,386 37,003 34,138 33,958 3.6%
----------------------------------------------------------------------------------
Income before income taxes 16,486 15,489 14,369 16,269 13,945 18.2%
Income taxes 4,806 4,262 3,648 3,990 3,262 47.3%
----------------------------------------------------------------------------------
Net income $ 11,680 $ 11,227 $ 10,721 $ 12,279 $ 10,683 9.3%
==================================================================================
KEY RATIOS AND DATA
Net interest margin (FTE) 3.33% 3.63% 3.56% 3.55% 3.55%
Return on average assets 1.04% 1.03% 0.98% 1.10% 0.97%
Return on average equity 12.70% 12.33% 12.01% 13.89% 12.53%
Efficiency Ratio 62.84% 63.64% 57.87% 62.84% 66.24%
Equity/assets (end of period) 8.36% 8.19% 8.27% 7.87% 7.92%
Allowance to ending loans 1.46% 1.46% 1.40% 1.22% 1.24%
Allowance to non-accrual loans 123.79% 146.55% 110.11% 108.24% 124.28%
Non-accrual loans to loans 1.18% 1.00% 1.27% 1.13% 0.99%
Non-performing assets to total assets 1.06% 0.98% 1.08% 0.92% 0.89%
Total assets under administration $4,387,492 $4,490,675 $4,385,686 $4,621,876 $4,427,569
Mortgage loans closed $ 307,092 $ 292,655 $ 205,126 $ 300,731 $ 206,277
AMCORE Financial, Inc.
(Unaudited)
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($ in 000's) 3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 3Q '03/'02 Ending
AVERAGE BALANCE SHEET 2003 2003 2003 2002 2002 Incr(Decr) Balances
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Assets:
Investment securities $1,062,464 $1,069,834 $1,108,334 $1,145,761 $1,214,179 (12.5%) $1,080,824
Short-term investments 43,182 18,080 8,415 12,865 10,506 311.0% 26,803
Loans held for sale 90,862 75,447 53,843 80,476 46,728 94.4% 38,951
Commercial 737,687 758,242 759,934 734,378 734,247 0.5% 737,657
Commercial real estate 1,205,728 1,165,968 1,115,425 1,026,771 951,786 26.7% 1,235,132
Residential real estate 384,463 401,564 440,192 464,713 484,122 (20.6%) 371,489
Consumer 563,397 534,234 586,261 592,569 557,683 1.0% 562,861
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Total loans 2,891,275 2,860,008 2,901,812 2,818,431 2,727,838 6.0% 2,907,139
Allowance for loan losses (43,166) (41,358) (35,001) (34,928) (34,643) 24.6% (42,512)
Other non-earning assets 394,935 390,820 403,172 405,032 384,138 2.8% 407,680
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Total assets $4,439,552 $4,372,831 $4,440,575 $4,427,637 $4,348,746 2.1% $4,418,885
====================================================================================
Liabilities and Stockholders' Equity:
Non-interest bearing deposits $ 409,540 $ 388,230 $ 370,132 $ 378,694 $ 360,049 13.7% $ 420,089
Interest-bearing demand and savings 1,326,271 1,186,776 1,124,422 1,117,782 1,126,334 17.8% 1,369,437
Time deposits 1,179,649 1,182,922 1,246,212 1,274,451 1,267,353 (6.9%) 1,165,058
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Total Bank issued deposits 2,915,460 2,757,928 2,740,766 2,770,927 2,753,736 5.9% 2,954,584
------------------------------------------------------------------------------------
Wholesale deposits 458,814 534,136 553,767 451,083 419,206 9.4% 437,710
Short-term borrowings 419,447 439,717 514,470 583,602 546,622 (23.3%) 378,757
Long-term borrowings 196,135 188,857 184,835 185,139 210,996 (7.0%) 210,377
Other liabilities 84,801 87,008 84,715 86,075 79,926 6.1% 68,188
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Total liabilities 4,074,657 4,007,646 4,078,553 4,076,826 4,010,486 1.6% 4,049,616
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Realized Stockholders' Equity 353,295 345,184 340,073 328,100 322,254 9.6% 357,912
Other Comprehensive Income 11,600 20,001 21,949 22,711 16,006 (27.5%) 11,357
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Total Stockholders' Equity 364,895 365,185 362,022 350,811 338,260 7.9% 369,269
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Total Liabilities & Stockholders' Equity $4,439,552 $4,372,831 $4,440,575 $4,427,637 $4,348,746 2.1% $4,418,885
====================================================================================
CREDIT QUALITY
Ending allowance for loan losses $ 42,512 $ 42,154 $ 39,600 $ 35,214 $ 34,177 24.4%
Net charge-offs 3,960 2,175 6,782 2,884 3,169 25.0%
Net charge-offs to avg loans (annualized) 0.54% 0.30% 0.95% 0.41% 0.46%
Non-performing assets:
Non-accrual loans $ 34,343 $ 28,764 $ 35,963 $ 32,535 $ 27,501 24.9%
Loans 90 days past due & still accruing 6,260 10,491 6,362 3,555 7,337 (14.7%)
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Total non-performing loans 40,603 39,255 42,325 36,090 34,838 16.5%
Foreclosed real estate 5,098 3,604 3,248 3,415 3,118 63.5%
Other foreclosed assets 921 1,153 1,614 2,024 1,362 (32.4%)
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Total non-performing assets $ 46,622 $ 44,012 $ 47,187 $ 41,529 $ 39,318 18.6%
========================================================================
YIELD AND RATE ANALYSIS
Assets:
Investment securities (FTE) 4.37% 4.98% 5.27% 5.59% 5.92%
Short-term investments 0.92% 1.04% 1.06% 1.42% 1.47%
Loans held for sale 7.01% 8.65% 8.71% 7.58% 10.89%
Commercial 5.59% 5.91% 5.85% 6.13% 6.44%
Commercial real estate 5.52% 5.80% 5.97% 6.31% 6.56%
Residential real estate 6.05% 6.42% 6.54% 6.80% 7.25%
Consumer 6.87% 7.61% 7.57% 7.85% 8.01%
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Total loans (FTE) 5.87% 6.25% 6.35% 6.67% 6.95%
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Total interest-earning assets (FTE) 5.46% 5.94% 6.07% 6.36% 6.67%
==============================================================
Liabilities:
Interest-bearing demand and savings 0.90% 0.93% 0.87% 1.27% 1.65%
Time deposits 3.18% 3.41% 3.82% 4.12% 4.33%
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Total Bank issued deposits 1.98% 2.17% 2.42% 2.79% 3.07%
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Wholesale deposits 3.75% 3.69% 3.76% 4.34% 5.08%
Short-term borrowings 2.22% 2.48% 2.50% 2.76% 3.19%
Long-term borrowings 5.47% 5.68% 6.10% 6.41% 5.94%
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Total interest-bearing liabilities 2.42% 2.63% 2.82% 3.16% 3.49%
==============================================================
Net interest spread 3.04% 3.31% 3.25% 3.20% 3.18%
Net interest margin (FTE) 3.33% 3.63% 3.56% 3.55% 3.55%
==============================================================