EXHIBIT 99.1
July 15, 2004
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 2ND QUARTER EARNINGS
SIGNIFICANT ASSET QUALITY IMPROVEMENT
Flash Results
(Numbers in Thousands, Except Per Share Data)
2nd quarter 2004 2nd quarter 2003 1st quarter 2004
Net Revenues $54,477 $54,270 $54,817
Net Income $10,415 $11,227 $10,018
Diluted Shares 25,285 25,054 25,500
Diluted EPS $0.41 $0.45 $0.39
ROCKFORD, IL -- AMCORE Financial, Inc. (Nasdaq: AMFI) reported diluted
earnings per share of $0.41 for second quarter 2004, a $0.04 decrease, compared
to $0.45 per diluted share in second quarter 2003. Net income in the second
quarter of 2004 was $10.4 million, a seven percent decrease from the $11.2
million in the prior-year period. The most noteworthy items in the quarter were
the significant improvement in asset quality with total non-performing assets
decreasing 39 percent from the same period a year ago and the Company's branch
expansion activities achieving break-even.
"Quality loan growth is one of our key initiatives and the steps we
implemented to improve our credit quality are showing results," said Kenneth E.
Edge, Chairman, President and CEO of AMCORE. "For the third consecutive quarter,
we reduced our total non-performing loans and assets. As a result, we have
reduced credit costs and expect our charge-offs for the rest of the year to
continue to decline from current levels. At the same time, our branch expansion
program has achieved break-even, well ahead of the anticipated fourth quarter
target date, and further demonstrates the significant progress AMCORE is
making."
Highlights
----------
o Net interest income increased seven percent to $37.6 million from $35.1
million during the same quarter a year ago.
o The net interest margin decreased three basis points to 3.60 percent in
second quarter 2004 from 3.63 percent during the same period in 2003.
o The allowance to non-accrual loans increased to 232 percent compared to 147
percent in second quarter 2003.
o Non-interest income decreased $2.3 million from second quarter 2003. The
prior year period included $2.0 million in net security gains. Second
quarter 2004 included a $1.7 million mortgage servicing rights impairment
reversal, compared to a $1.1 million impairment charge in second quarter
2003.
o Average loan balances grew eight percent from a year ago, while average
Bank issued deposits increased six percent over the same time period.
o The provision for loan losses declined $1.5 million, reflecting improved
credit quality.
o Operating expenses increased six percent, or $2.0 million, compared to the
same quarter last year due in large part to the opening of 13 branches
during the last twelve months.
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Second Quarter Results
----------------------
Net interest income in second quarter 2004 grew seven percent compared to
the same quarter last year, or $2.5 million, due to continued strong loan
growth. The net interest margin decreased to 3.60 percent, a three basis point
decline from 3.63 percent during the same quarter a year ago. "The increase in
net interest income is primarily due to increased commercial real estate loans
and secondarily to investment volumes," said Edge. "The increased volumes,
during a period of historically low interest rates, resulted in modest dilution
in the margin."
Provision for loan losses decreased nearly $1.5 million compared to second
quarter 2003, as total non-performing loans decreased 45 percent from the year
earlier period.
Average loans rose $223 million to $3.1 billion, an eight percent increase
from second quarter 2003. The growth came from average increases of $236
million, or 12 percent, in commercial lending driven by AMCORE's branch
expansion in Chicago suburban and Madison area markets. Consumer loan balances
remained relatively flat compared to the previous quarter a year ago.
Average bank issued deposits grew to $2.9 billion, an increase of six
percent, or $168 million, compared to a year ago. "Our focus is to grow
transactional deposits, such as checking accounts, which helps lower our funding
costs as well as increase our number of households," said Edge. "Once we have a
customer's checking account, we can cross-sell other products and services. The
more services customers have with us, the more likely we are to retain their
business over time."
Total non-interest income for the quarter decreased $2.3 million, compared
to the same period a year ago. The decrease included $2 million in security
gains recognized during the second quarter of 2003. There were no security gains
recognized in second quarter 2004.
Trust and asset management revenues decreased $302,000, or five percent,
from the second quarter 2003 to $5.4 million in second quarter 2004. Assets
under administration totaled $4.4 billion at the end of the quarter compared to
$4.5 billion a year ago. "Increasing investments remains a key initiative for us
as we work to increase assets under administration by retaining and expanding
existing customer relationships and seeking out new clients," said Edge.
Mortgage banking increased 35 percent, or $734,000, during the second
quarter 2004 compared to the same period a year ago. Included in the increase
was a $1.7 million mortgage servicing rights impairment reversal in second
quarter 2004, compared to a $1.1 million impairment charge in second quarter
2003. Mortgage applications totaled $146 million in second quarter 2004 compared
to $447 million during the same quarter a year ago. Mortgage closings totaled
$154 million in second quarter 2004, a 47 percent decrease from the $293 million
in second quarter 2003. Of total second quarter closings, 49 percent were due to
refinancing compared to 76 percent a year ago. "We expected our mortgage revenue
to decrease as the refinancing volume slowed," said Edge. "However, we still
expect to show strong growth in new purchase mortgages, which continue to
increase as we expand in the Chicago and Madison markets."
Company owned life insurance revenues declined $1.2 million compared to the
second quarter of 2003. Included in the decline was a $350,000 adjustment
attributable to a change in estimate in a policy's cash surrender value provided
by the carrier. The remaining decline was primarily attributable to lower yields
and losses in value of underlying variable return investments.
Total operating expenses increased six percent, or $2.0 million, in second
quarter 2004 compared to the same quarter last year. The increase is due
primarily to personnel and facility expenses related to branch expansion and
escalating employee health care costs, which increased $579,000 over the prior
year period. The increase in employee health care costs is due to the impact of
branch expansion, adverse claim experience in the Company's self-funded plan and
overall medical cost inflation. "We have opened 13 branches during the past 12
months, which has added to our personnel costs as well as our net occupancy and
equipment costs," said Edge. "One area where we have seen significant savings
has been in data processing expenses due to our conversion and in-sourcing of
core data processing systems."
Personnel costs increased 15 percent over the same quarter a year ago. The
largest component of personnel costs is salaries and wages, which increased $2.0
million during the second quarter 2004 over the same period a year ago. The
increase can be primarily attributed to the branch expansion.
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Asset Quality & Reserves
------------------------
Total non-accrual loans decreased 35 percent, or $10.1 million, from June
30, 2003 and also decreased $10.6 million, or 36 percent, from March 31, 2004.
Loans 90 days past due and still accruing interest decreased 73 percent, or $7.7
million, from June 30, 2003, and decreased $1.6 million from March 31, 2004. The
percentage of total non-performing assets to total assets was 0.56 percent at
June 30, 2004 down from 0.98 percent at June 30, 2003 and 0.86 percent at March
31, 2004.
Net charge-offs were $3.5 million, an increase of 62 percent, or $1.4
million, from second quarter 2003 and an increase of six percent, or $212,000,
from first quarter 2004. Net charge-offs were 46 basis points of average loans
on an annualized basis during second quarter 2004 compared to 30 basis points
for second quarter 2003 and 44 basis points for first quarter 2004.
Total non-accrual loans as a percentage of loans decreased to 0.59 percent
from 1.00 percent at June 30, 2003 and 0.96 percent at March 31, 2004. The
allowance for loan losses, as a percentage of ending loans, was 1.38 percent at
June 30, 2004 compared to 1.46 percent at June 30, 2003 and 1.43 percent at
March 31, 2004. The allowance to non-accrual loans ratio was 232 percent at June
30, 2004 compared to 147 percent at June 30, 2003 and 149 percent at March 31,
2004.
"Improving credit quality is part of our quality loan growth initiative,"
said Edge. "In 2003, we expanded our workout and collection staffs, which
enabled us to identify and quickly address deteriorating credits and limit
further erosion of value. The results are evident in our decreased
non-performing loans for three consecutive quarters."
Branching Update
----------------
In 2004, AMCORE is opening and/or upgrading 11 offices. In first quarter,
AMCORE opened one limited branch office (LBO) in Gurnee, IL, and a full service
facility in Freeport, IL. During second quarter, three full service facilities
opened in the Illinois communities of Elgin, Naperville and Peru. For third
quarter, openings will include an LBO in Lake Zurich, IL and full service
facilities in Schaumburg, IL and Madison, WI. Fourth quarter openings will
include three full service facilities in the Illinois communities of Aurora,
Carol Stream and Morton Grove. During 2004, four LBOs and two in-store branches
will close as new branches open. "Upgrading profitable LBOs and in-store
branches into full service facilities is a major focus for us this year," said
Edge.
There was no dilution impact of the branching strategy in second quarter
2004 compared to similar results during the same quarter a year ago. "We still
expect costs to outpace net revenues for the full year in 2004 with dilution
projected not to exceed $0.04 per share. In 2005, we expect the branch expansion
program will become accretive to earnings per share in the range of $0.10 to
$0.15 per share."
The branch expansion strategy has increased AMCORE's presence in key
high-growth markets and is expected to increase revenue growth rates beyond
historic levels. The 16 net new branches opened since April 2001 contributed
total loans of $728 million and total deposits of $316 million at June 30, 2004.
Same-branch contributions, which include new branches opened as of June 30, 2003
(a year ago), were $647 million in loans and $236 million in deposits.
By 2006, AMCORE expects to have added 25 new offices since the beginning of
the initiative in 2001. "Total offices by the end of 2006 should number 75,
two-thirds of which will be located in markets that we believe exhibit
characteristics of higher growth," said Edge. (See chart for details.)
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AMCORE Branch Expansion Plans
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Strategy LBO* Full Serv. In-store Branch Expansion Total Locations
-------- ---- ---------- -------- ---------------- ---------------
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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
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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
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2003
- - Sold branches (6)
- - Closed in-store (1)
+ New branches 4 7 0 11 11
- - Closed, moved to new facility (1) (1) (2) (4) (4)
Cumulative total 7 9 (2) 14 64
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2004 Projected
+ New branches 2 9 0 11 11
- - Closed, moved to new facility (4) 0 (2) (6) (6)
Cumulative total 5 18 (4) 19 69
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2005 Projected
+ New branches 1 8 0 9 9
- Closed, moved to new facility (3) 0 0 (3) (3)
Cumulative total 3 26 (4) 25 75
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2006 Projected
+ New branches 0 2 0 2 2
- - Closed, moved to new facility (2) 0 0 (2) (2)
Cumulative total 1 28 (4) 25 75
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*LBO is a limited branch office.
**Includes asset management location in Des Moines
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AMCORE Financial, Inc. is headquartered in Northern Illinois and has
banking assets of $4.8 billion and investment assets under administration of
$4.4 billion with 66 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, asset 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 estimates"; (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 and installation of 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.
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AMCORE Financial, Inc.
CONSOLIDATED FINANCIAL SUMMARY
(Unaudited)
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($ in 000's, except per share data) 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr. 2Q '04/'03
SHARE DATA 2004 2004 2003 2003 2003 Incr(Decr)
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Diluted earnings $ 0.41 $ 0.39 $ 0.39 $ 0.47 $ 0.45 (9%)
Cash dividends $ 0.17 $ 0.17 $ 0.17 $ 0.17 $ 0.16 6%
Book value $ 14.68 $ 15.34 $ 14.98 $ 14.81 $ 14.79 (1%)
Average diluted shares outstanding 25,285 25,500 25,282 25,100 25,054 1%
INCOME STATEMENT
Net interest income $ 37,640 $ 37,288 $ 36,053 $ 33,025 $ 35,093 7%
Provision for loan losses 3,282 4,675 3,295 4,318 4,729 (31%)
Non-interest income:
Trust & asset management 5,375 5,516 5,490 5,619 5,677 (5%)
Service charges on deposits 4,966 4,403 4,824 4,751 4,638 7%
Mortgage banking income (loss) 2,835 (385) 1,602 6,495 2,101 35%
Company owned life insurance 540 2,169 1,793 1,753 1,693 (68%)
Gain on sale of loans/branches -- 612 -- -- -- N/A
Net security gains -- 1,914 2,090 -- 2,012 (100%)
Other 3,121 3,300 2,816 2,785 3,056 2%
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Total non-interest income 16,837 17,529 18,615 21,403 19,177 (12%)
Operating expenses:
Personnel costs 21,417 22,426 23,103 19,033 18,565 15%
Net occupancy and equipment 4,748 4,963 5,108 4,624 4,062 17%
Data processing 567 584 549 1,122 1,635 (65%)
Professional fees 1,149 1,242 1,180 1,134 1,207 (5%)
Advertising & business development 1,407 1,514 1,681 1,331 1,358 4%
Communication expense 1,124 1,126 1,288 1,174 1,030 9%
Other 5,592 4,896 5,198 5,206 6,195 (10%)
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Total operating expenses 36,004 36,751 38,107 33,624 34,052 6%
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Income before income taxes 15,191 13,391 13,266 16,486 15,489 (2%)
Income taxes 4,776 3,373 3,390 4,806 4,262 12%
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Net income $ 10,415 $ 10,018 $ 9,876 $ 11,680 $ 11,227 (7%)
===================================================================================
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2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr. Basis Point
KEY RATIOS AND DATA 2004 2004 2003 2003 2003 Change
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Net interest margin (FTE) 3.60% 3.65% 3.62% 3.33% 3.63% (3)
Return on average assets 0.90% 0.88% 0.88% 1.04% 1.03% (13)
Return on average equity 11.20% 10.50% 10.57% 12.70% 12.33% (113)
Efficiency Ratio 66.09% 67.04% 69.71% 61.78% 62.75% 334
Equity/assets (end of period) 7.60% 8.36% 8.27% 8.36% 8.19% (59)
Allowance to loans (end of period) 1.38% 1.43% 1.41% 1.46% 1.46% (8)
Allowance to non-accrual loans 231.66% 148.69% 132.98% 123.79% 146.55% 8,511
Non-accrual loans to loans 0.59% 0.96% 1.06% 1.18% 1.00% (41)
Non-performing assets to total assets 0.56% 0.86% 0.91% 1.06% 0.98% (42)
Total assets under administration (in millions) $ 4,376 $ 4,343 $ 4,284 $ 4,387 $ 4,491 (3%)
Mortgage loans closed (in millions) $ 154 $ 98 $ 89 $ 307 $ 293 (47%)
FTE adjustment (in thousands) $ 1,013 $ 1,037 $ 1,130 $ 1,193 $ 1,405 (28%)
AMCORE Financial, Inc.
(Unaudited)
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($ in 000's) 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr. 2Q '04/'03 Ending
AVERAGE BALANCE SHEET 2004 2004 2003 2003 2003 Incr(Decr) Balances
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Assets:
Investment securities $ 1,177,696 $ 1,152,054 $ 1,099,910 $ 1,062,464 $ 1,069,834 10% $1,237,121
Short-term investments 7,226 7,697 13,512 43,182 18,080 (60%) 426
Loans held for sale 44,252 25,969 23,790 90,862 75,447 (41%) 27,413
Commercial 742,460 731,230 725,345 737,687 758,242 (2%) 732,711
Commercial real estate 1,417,519 1,369,631 1,278,552 1,205,728 1,165,968 22% 1,482,103
Residential real estate 390,653 372,602 377,263 384,463 401,564 (3%) 399,878
Consumer 532,592 550,211 574,262 563,397 534,234 (0%) 523,744
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Total loans $ 3,083,224 $ 3,023,674 2,955,422 2,891,275 2,860,008 8% 3,138,436
Allowance for loan losses (44,660) (43,397) (43,978) (43,166) (41,358) 8% (43,230)
Other non-earning assets 408,624 399,012 396,257 394,935 390,820 5% 438,030
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Total assets $ 4,676,362 $ 4,565,009 $ 4,444,913 $ 4,439,552 $ 4,372,831 7% $4,798,196
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Liabilities and Stockholders' Equity:
Non-interest bearing deposits $ 449,694 $ 420,742 $ 425,418 $ 409,540 $ 388,230 16% $ 301,353
Interest-bearing demand and savings 1,352,839 1,454,893 1,395,518 1,326,271 1,186,776 14% 1,349,537
Time deposits 1,123,071 1,090,754 1,137,796 1,179,649 1,182,922 (5%) 1,092,675
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Total Bank issued deposits $ 2,925,604 $ 2,966,389 2,958,732 2,915,460 2,757,928 6% 2,743,565
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Wholesale deposits 550,291 447,091 385,494 458,814 534,136 3% 594,419
Short-term borrowings 577,063 524,159 460,061 419,447 439,717 31% 858,994
Long-term borrowings 184,297 183,515 205,369 196,135 188,857 (2%) 180,037
Other liabilities 65,174 60,077 64,687 84,801 87,008 (25%) 56,703
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Total liabilities $ 4,302,429 $ 4,181,231 $ 4,074,343 4,074,657 4,007,646 7% 4,433,718
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Stockholders' Equity 371,003 372,055 361,691 353,295 345,184 7% 368,533
Other Comprehensive Income 2,930 11,723 8,879 11,600 20,001 (85%) (4,055)
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Total Stockholders' Equity 373,933 383,778 370,570 364,895 365,185 2% 364,478
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Total Liabilities & Stockholders' Equity $ 4,676,362 $ 4,565,009 $ 4,444,913 $ 4,439,552 $ 4,372,831 7% $4,798,196
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CREDIT QUALITY
Ending allowance for loan losses $ 43,230 $ 43,475 $ 42,115 $ 42,512 $ 42,154 3%
Net charge-offs 3,527 3,315 3,692 3,960 2,175 62%
Net charge-offs to avg loans (annualized) 0.46% 0.44% 0.50% 0.54% 0.30%
Non-performing assets:
Non-accrual loans $ 18,661 $ 29,239 $ 31,671 $ 34,343 $ 28,764 (35%)
Loans 90 days past due & still accruing 2,803 4,401 3,304 6,260 10,491 (73%)
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Total non-performing loans 21,464 33,640 34,975 40,603 39,255 (45%)
Foreclosed real estate 4,548 5,223 4,433 5,098 3,604 26%
Other foreclosed assets 856 887 1,989 921 1,153 (26%)
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Total non-performing assets $ 26,868 $ 39,750 $ 41,397 $ 46,622 $ 44,012 (39%)
==========================================================================
YIELD AND RATE ANALYSIS
Assets:
Investment securities (FTE) 4.44% 4.70% 4.72% 4.37% 4.98%
Short-term investments 0.80% 0.99% 0.86% 0.92% 1.04%
Loans held for sale 6.91% 11.00% 8.59% 7.01% 8.65%
Commercial 5.39% 5.58% 5.46% 5.59% 5.91%
Commercial real estate 5.47% 5.34% 5.42% 5.52% 5.80%
Residential real estate 5.56% 5.79% 5.93% 6.05% 6.42%
Consumer 6.73% 6.87% 7.19% 6.87% 7.61%
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Total loans (FTE) 5.68% 5.73% 5.84% 5.87% 6.25%
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Total interest-earning assets (FTE) 5.34% 5.47% 5.54% 5.46% 5.94%
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Liabilities:
Interest-bearing demand and savings 0.83% 0.91% 0.95% 0.90% 0.93%
Time deposits 2.50% 2.70% 2.97% 3.18% 3.41%
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Total Bank issued deposits 1.59% 1.67% 1.86% 1.98% 2.17%
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Wholesale deposits 2.71% 3.01% 3.41% 3.75% 3.69%
Short-term borrowings 2.07% 2.09% 2.02% 2.22% 2.48%
Long-term borrowings 4.98% 5.25% 4.45% 5.47% 5.68%
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Total interest-bearing liabilities 1.99% 2.07% 2.19% 2.42% 2.63%
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Net interest spread 3.35% 3.40% 3.35% 3.04% 3.31%
Net interest margin (FTE) 3.60% 3.65% 3.62% 3.33% 3.63%
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