January 18, 2005
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 4TH QUARTER EARNINGS
NET INCOME AND EARNINGS PER SHARE INCREASE 31 PERCENT
Flash Results
(Numbers in Thousands, Except Per Share Data)
4th quarter 2004 YTD 2004 4th quarter 2003 YTD 2003
Net Revenues $58,866 $223,509 $54,668 $226,304
Net Income $12,923 $45,696 $ 9,876 $ 43,504
Diluted Shares 25,145 25,251 25,282 25,090
Diluted EPS $0.51 $1.81 $0.39 $1.73
ROCKFORD, IL -- AMCORE Financial, Inc. (Nasdaq: AMFI) reported record
diluted earnings per share of $0.51 for fourth quarter 2004, a 31 percent
increase, compared to $0.39 per diluted share in fourth quarter 2003. Net income
in the fourth quarter of 2004 was $12.9 million, a 31 percent increase from the
$9.9 million in the prior-year period. Full year 2004 diluted earnings per share
were a record $1.81, an increase of $0.08 or five percent, from $1.73 per
diluted share in 2003. AMCORE's net income for the full year 2004 rose $2.2
million, or five percent, to $45.7 million from $43.5 million in 2003.
"Consistently over the past three years, we have successfully expanded into
higher growth markets," said Kenneth E. Edge, Chairman, President and CEO of
AMCORE. "Every year since the branching program began in 2001, we improved net
income performance over the prior year. In 2004, our branch expansion
performance exceeded expectations by breaking even ahead of schedule."
Highlights
----------
o Average assets increased 11 percent to $4.9 billion in the fourth quarter
2004 compared to $4.4 billion in fourth quarter 2003.
o Net interest income increased 10 percent, or $3.6 million, to $39.6 million
in the fourth quarter 2004 from $36.1 million during the same quarter a
year ago.
o The net interest margin decreased four basis points to 3.58 percent in
fourth quarter 2004 from 3.62 percent in fourth quarter 2003, but increased
five basis points when compared to third quarter 2004.
o Non-performing loans decreased $3.0 million, or nine percent, from December
31, 2003.
o Provision for loan losses increased 44 percent, or $1.4 million in the
fourth quarter 2004, compared to fourth quarter 2003.
o Average loan balances grew nine percent, or $260 million, compared to
fourth quarter 2003.
o Average bank issued deposits grew seven percent, or $203 million, compared
to fourth quarter 2003.
o Operating expenses decreased five percent, or $1.9 million, compared to
fourth quarter 2003.
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Fourth Quarter Results
----------------------
Net interest income in fourth quarter 2004 grew 10 percent, or $3.6
million, to $39.6 million compared to the same quarter in 2003 due to continued
strong loan growth. The net interest margin decreased four basis points to 3.58
percent in fourth quarter 2004 from 3.62 percent in fourth quarter 2003, but
increased five basis points when compared to third quarter 2004. For the full
year 2004, the net interest margin increased five basis points to 3.59 percent
from 3.54 percent in 2003.
Other key ratio improvements include a 16 basis point increase in return on
average assets to 1.04 percent in fourth quarter 2004 compared to 0.88 percent
during the prior-year period. Return on average equity increased 275 basis
points to 13.32 percent in fourth quarter 2004 compared to 10.57 percent in
fourth quarter 2003.
Average loans rose $260 million to $3.2 billion, a nine percent increase
from fourth quarter 2003. The growth came from average increases of $461
million, or 23 percent, in commercial lending driven by AMCORE's branch
expansion in Chicago suburban and Madison area markets. Consumer loan balances
decreased 42 percent compared to the same quarter a year ago primarily due to
lower indirect automobile lending and securitization.
Loan yields rose three basis points to 5.87 percent in fourth quarter 2004
compared to the same period a year ago, and were up 17 basis points from third
quarter 2004. This is the result of a higher proportion of floating rate loans
in the portfolio compared to the third quarter 2004.
Average bank issued deposits grew to $3.1 billion, an increase of seven
percent, or $203 million, compared to a year ago. The total cost of bank issued
deposits decreased eight basis points from fourth quarter 2003 as the Company
continued to shift its deposit mix to lower cost transaction accounts. "We are
making significant progress in increasing deposits, particularly checking and
transaction accounts," said Edge. "These products are important in attracting
new households and building stronger customer relationships, which enables us to
cross-sell other consumer financial products such as home equity loans and
investments."
Average non-interest bearing deposits increased 10 percent to $469 million
in fourth quarter 2004 from $425 million in fourth quarter 2003. Average
interest-bearing demand and savings deposits grew 13 percent to $1.5 billion in
fourth quarter 2004 compared to $1.3 billion during the same period a year ago.
Average time deposits declined one percent to $1.1 billion in fourth quarter
2004. "We have been very strategic in executing our deposit strategy," said
Edge. "We maintained tight pricing disciplines as we shifted our mix to lower
cost funds. On an annualized basis, our average bank issued deposits grew by 17
percent during the fourth quarter."
Total non-interest income increased three percent, or $638,000, to $19.3
million over the fourth quarter of 2003. The increase was due to a $469,000
increase in service charges on deposits, a $427,000 increase in mortgage banking
income and a $636,000 gain on the sale of loans, primarily $81 million of
indirect auto loans. Net security gains declined $869,000 in the fourth quarter
2004 compared to the prior-year quarter.
Mortgage banking income increased 27 percent to $2.0 million in fourth
quarter 2004 compared to $1.6 million in the same period a year ago. Fourth
quarter 2004 included a mortgage servicing rights impairment reversal of
$684,000 compared to the $306,000 reversal recorded in the fourth quarter 2003,
an increase of $377,000. Mortgage closings totaled $112 million in fourth
quarter 2004, a 26 percent increase from the $89 million in fourth quarter 2003.
Of total fourth quarter closings, most of the growth was due to increases in new
home-purchase mortgages, which increased 37 percent in fourth quarter 2004
compared to the same period a year ago. Refinancing volume, on the other hand,
increased only 11 percent compared to the same quarter a year ago. "We made
solid progress in growing our new home-purchase mortgages and expect to continue
to grow this business as we add mortgage originators in strong housing markets
like the Chicago suburbs," said Edge.
Trust and asset management revenues decreased $411,000, or seven percent,
to $5.1 million in fourth quarter 2004 from the fourth quarter 2003 level.
Assets under administration totaled $4.4 billion at the end of the quarter
compared to $4.3 billion a year ago.
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Total operating expenses decreased five percent, or $1.9 million, in fourth
quarter 2004 compared to the same quarter last year. Most notably, the decrease
was due to lower incentives, lower health care costs, decreases in other real
estate expenses and severance expense recorded during fourth quarter 2003.
"We maintained good expense discipline during a time of expansion, and this
has helped us keep costs down," said Edge. "We also created favorable operating
leverage and are supporting a higher level of assets within the same cost
structure."
Asset Quality & Reserves
------------------------
Non-accrual loans totaled $30.1 million at December 31, 2004, a decrease of
five percent, or $1.5 million, from December 31, 2003, but an increase of $12.8
million, or 74 percent, from September 30, 2004. Loans 90 days past due and
still accruing interest totaled $1.8 million at December 31, 2004, a decrease of
44 percent, or $1.5 million, from December 31, 2003, and a decrease of 39
percent, or $1.2 million, from September 30, 2004. The percentage of total
non-performing assets to total assets was 0.77 percent at December 31, 2004 down
from 0.91 percent at December 31, 2003 and up from 0.52 percent at September 30,
2004. "The increase in non-accruals from third quarter 2004 relates to three
credits in our core markets," said Edge.
Net charge-offs were $4.7 million, an increase of 28 percent or $1.0
million, from fourth quarter 2003 and an increase of 54 percent, or $1.7
million, from third quarter 2004. Net charge-offs were 58 basis points of
average loans on an annualized basis during fourth quarter 2004, compared to 50
basis points for fourth quarter 2003 and 38 basis points for third quarter 2004.
The increase was due mainly to charge-offs in the commercial and industrial
portfolio.
Total non-accrual loans as a percentage of loans decreased to 0.92 percent
from 1.06 percent at December 31, 2003, but increased from 0.55 percent at
September 30, 2004. The allowance for loan losses, as a percentage of ending
loans, was 1.25 percent at December 31, 2004 compared to 1.41 percent at
December 31, 2003 and 1.33 percent at September 30, 2004. The allowance to
non-accrual loans ratio was 136 percent at December 31, 2004, compared to 133
percent at December 31, 2003 and 242 percent at September 30, 2004.
"Fluctuations occur from time to time in credit quality, but we believe the
overall trend remains positive," said Edge. "We are working through the problem
credits and have made significant progress over the past two years in shortening
the collection and resolution process for non-performing assets."
Branching Update
----------------
During the fourth quarter 2004, AMCORE's branch expansion program was
accretive to earnings by $0.04 per share and was essentially break even for the
full year. AMCORE expects its branch expansion program to be accretive to
earnings by $0.10 to $0.15 per share in 2005.
"The success of our branch expansion program continues to exceed
expectations and is adding significant growth in loans and net interest income,"
said Edge. "Over the past three years, our strategy has resulted in profitable
growth opportunities in our expansion markets. Our success is really a credit to
our AMCORE team, which remains committed to growth and building long-term
shareholder value."
In 2004, AMCORE opened and/or upgraded 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. In the third
quarter, openings included an LBO in Lake Zurich, IL and full service facilities
in Schaumburg, IL and Madison, WI. In the fourth quarter, openings included
three full service facilities in the Illinois communities of Aurora, Carol
Stream and Morton Grove. During 2004, three LBOs and two in-store branches
closed as new branches opened.
The 20 (net) new branches opened since April 2001 contributed total loans
of $1.0 billion and total deposits of $402 million at December 31, 2004.
Same-branch contributions, which include new branches opened as of December 31,
2003, were $948 million in loans and $379 million in deposits.
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By 2009, AMCORE expects to have added 34 (net) new offices since the
beginning of the initiative in 2001. "By the end of 2009, AMCORE is scheduled to
have 84 offices, two-thirds of which will be located in markets that we believe
exhibit strong growth characteristics," said Edge.
AMCORE Financial, Inc. is headquartered in Northern Illinois and has
banking assets of $4.9 billion and investment assets under administration of
$4.4 billion with 70 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; (XVIII) disruption
of operations caused by the conversion and installation of data processing
systems, and (XIX) zoning restrictions or other limitations at the local level,
which could prevent limited branch offices from transitioning to full-service
facilities.
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) 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr.4Q '04/'03 Year to Date 2004/2003
SHARE DATA 2004 2004 2004 2004 2003 Incr(Decr) 2004 2003 Incr(Decr)
---------------------------------------------------------------------------------------------
Diluted earnings $ 0.51 $ 0.49 $ 0.41 $ 0.39 $ 0.39 31% $ 1.81 $ 1.73 5%
Cash dividends $ 0.17 $ 0.17 $ 0.17 $ 0.17 $ 0.17 0% $ 0.68 $ 0.66 3%
Book value $15.57 $15.44 $14.68 $15.34 $14.98 4% $15.57 $14.98 4%
Average diluted shares outstanding 25,145 25,078 25,285 25,500 25,282 (1%) 25,251 25,090 1%
INCOME STATEMENT
Net interest income $ 39,613 $ 38,431 $ 37,640 $ 37,288 $ 36,053 10% $ 152,972 $138,687 10%
Provision for loan losses 4,743 2,830 3,282 4,675 3,295 44% 15,530 24,917 (38%)
Non-interest income:
Trust & asset management 5,079 5,017 5,375 5,516 5,490 (7%) 20,987 22,524 (7%)
Service charges on deposits 5,293 5,388 4,966 4,403 4,824 10% 20,050 18,611 8%
Mortgage banking income (loss) 2,029 321 2,835 (385) 1,602 27% 4,800 13,187 (64%)
Company owned life insurance 1,684 1,346 540 2,169 1,793 (6%) 5,739 7,022 (18%)
Brokerage Commission Income 749 721 784 858 646 16% 3,112 2,634 18%
Bankcard Fees Income 1,108 1,111 1,007 902 888 25% 4,128 3,504 18%
Gain on asset/loan sales 636 1,214 - 612 - N/M 2,462 10,699 (77%)
Net security gains 1,221 250 - 1,914 2,090 (42%) 3,385 4,375 (23%)
Other 1,454 1,550 1,330 1,540 1,282 13% 5,874 5,061 16%
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Total non-interest income 19,253 16,918 16,837 17,529 18,615 3% 70,537 87,617 (19%)
Operating expenses:
Personnel costs 22,415 21,126 21,417 22,426 23,103 (3%) 87,384 80,184 9%
Net occupancy and equipment 4,805 4,645 4,748 4,963 5,108 (6%) 19,161 18,382 4%
Data processing 575 580 567 584 549 5% 2,306 5,096 (55%)
Professional fees 1,001 1,102 1,149 1,242 1,180 (15%) 4,494 4,583 (2%)
Advertising & business development 1,640 1,634 1,407 1,514 1,681 (2%) 6,194 5,792 7%
Communication expense 1,169 1,155 1,124 1,126 1,288 (9%) 4,574 4,693 (3%)
Other 4,636 4,707 5,592 4,896 5,198 (11%) 19,832 23,047 (14%)
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Total operating expenses 36,241 34,949 36,004 36,751 38,107 (5%) 143,945 141,777 2%
---------------------------------------------------------------------------------------------
Income before income taxes 17,882 17,570 15,191 13,391 13,266 35% 64,034 59,610 7%
Income taxes 4,959 5,230 4,776 3,373 3,390 46% 18,338 16,106 14%
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Net income $ 12,923 $ 12,340 $ 10,415 $ 10,018 $ 9,876 31% $ 45,696 $ 43,504 5%
=============================================================================================
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4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr.Basis Point Year to Date Basis Point
KEY RATIOS AND DATA 2004 2004 2004 2004 2003 Change 2004 2003 Change
---------------------------------------------------------------------------------------------
Net interest margin (FTE) 3.58% 3.53% 3.60% 3.65% 3.62% (4) 3.59% 3.54% 5
Return on average assets 1.04% 1.02% 0.90% 0.88% 0.88% 16 0.96% 0.98% (2)
Return on average equity 13.32% 13.22% 11.20% 10.50% 10.57% 275 12.06% 11.90% 16
Efficiency Ratio 61.57% 63.14% 66.09% 67.04% 69.71% (814) 64.40% 62.65% 175
Equity/assets (end of period) 7.82% 7.86% 7.60% 8.36% 8.27% (45)
Allowance to loans (end of period) 1.25% 1.33% 1.38% 1.43% 1.41% (16)
Allowance to non-accrual loans 135.81% 242.36% 230.60% 148.69% 132.98% 283
Non-accrual loans to loans 0.92% 0.55% 0.60% 0.96% 1.06% (14)
Non-performing assets to total assets 0.77% 0.52% 0.56% 0.86% 0.91% (14)
(in millions)
Total assets under administration $ 4,430 $ 4,225 $ 4,376 $ 4,343 $ 4,284 3%
Mortgage loans closed $ 112 $ 103 $ 154 $ 98 $ 89 26%
N/M = not meaningful
AMCORE Financial, Inc.
(Unaudited)
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($ in 000's) 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr. 4Q '04/'03 Ending
AVERAGE BALANCE SHEET 2004 2004 2004 2004 2003 Incr(Decr) Balances
---------------------------------------------------------------------------------------
Assets:
Investment securities $ 1,221,676 $ 1,233,926 $ 1,177,696 $ 1,152,054 $ 1,099,910 11% $ 1,249,250
Short-term investments 19,753 5,249 7,226 7,697 13,512 46% 361
Loans held for sale 80,666 32,609 44,252 25,969 23,790 239% 30,634
Loans: Commercial 731,376 735,864 742,460 731,230 725,345 1% 764,437
Commercial real estate 1,733,023 1,548,689 1,417,519 1,369,631 1,278,552 36% 1,784,772
Residential real estate 415,927 405,784 390,653 372,602 377,263 10% 412,753
Consumer 335,005 499,241 532,592 550,211 574,262 (42%) 316,838
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Total loans $ 3,215,331 $ 3,189,578 $ 3,083,224 $ 3,023,674 $ 2,955,422 9% 3,278,800
Allowance for loan losses (42,537) (44,006) (44,660) (43,397) (43,978) (3%) (40,945)
Other non-earning assets 427,681 412,202 408,624 399,012 396,257 8% 422,388
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Total assets $ 4,922,570 $ 4,829,558 $ 4,676,362 $ 4,565,009 $ 4,444,913 11% $ 4,940,488
=======================================================================================
Liabilities and Stockholders' Equity:
Non-interest bearing deposits $ 468,962 $ 456,804 $ 449,694 $ 420,742 $ 425,418 10% $ 479,079
Interest-bearing demand and savings 1,497,778 1,382,348 1,360,003 1,392,536 1,330,431 13% 1,520,382
Time deposits 1,129,816 1,129,726 1,123,071 1,090,754 1,137,796 (1%) 1,113,933
---------------------------------------------------------------------------------------
Total Bank issued deposits $ 3,096,556 $ 2,968,878 $ 2,932,768 $ 2,904,032 $ 2,893,645 7% 3,113,394
---------------------------------------------------------------------------------------
Wholesale deposits 646,833 647,561 550,291 515,530 456,935 42% 621,297
Short-term borrowings 559,979 606,686 577,063 524,159 460,061 22% 589,158
Long-term borrowings 166,074 180,565 184,297 183,515 205,369 (19%) 165,018
Other liabilities 67,094 54,527 58,010 53,995 58,333 15% 65,043
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Total liabilities $ 4,536,536 $ 4,458,217 $ 4,302,429 $ 4,181,231 $ 4,074,343 11% 4,553,910
---------------------------------------------------------------------------------------
Stockholders' Equity 380,152 370,976 371,003 372,055 361,691 5% 384,685
Other Comprehensive Income 5,882 365 2,930 11,723 8,879 (34%) 1,893
---------------------------------------------------------------------------------------
Total Stockholders' Equity 386,034 371,341 373,933 383,778 370,570 4% 386,578
---------------------------------------------------------------------------------------
Total Liabilities & Stockholders' Equity $ 4,922,570 $ 4,829,558 $ 4,676,362 $ 4,565,009 $ 4,444,913 11% $ 4,940,488
=======================================================================================
CREDIT QUALITY
Ending allowance for loan losses $ 40,945 $ 41,980 $ 43,230 $ 43,475 $ 42,115 (3%)
Net charge-offs 4,722 3,058 3,527 3,315 3,692 28%
Net charge-offs to avg loans (annualized) 0.58% 0.38% 0.46% 0.44% 0.50% 16%
Non-performing assets:
Non-accrual loans $ 30,148 $ 17,321 $ 18,747 $ 29,239 $ 31,671 (5%)
Loans 90 days past due & still accruing 1,848 3,028 2,717 4,401 3,304 (44%)
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Total non-performing loans 31,996 20,349 21,464 33,640 34,975 (9%)
Foreclosed real estate 4,940 4,029 4,548 5,223 4,433 11%
Other foreclosed assets 923 950 856 887 1,989 (54%)
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Total non-performing assets $ 37,859 $ 25,328 $ 26,868 $ 39,750 $ 41,397 (9%)
===========================================================================
YIELD AND RATE ANALYSIS
Assets:
Investment securities (FTE) 4.60% 4.49% 4.44% 4.70% 4.72%
Short-term investments 2.02% 1.23% 0.74% 0.99% 0.86%
Loans held for sale 7.59% 8.66% 6.92% 11.00% 8.59%
Loans: Commercial 5.77% 5.37% 5.39% 5.58% 5.46%
Commercial real estate 5.81% 5.59% 5.47% 5.34% 5.43%
Residential real estate 5.76% 5.64% 5.56% 5.79% 5.91%
Consumer 6.57% 6.58% 6.73% 6.87% 7.19%
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Total loans (FTE) 5.87% 5.70% 5.68% 5.73% 5.84%
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Total interest-earning assets (FTE) 5.54% 5.38% 5.34% 5.47% 5.54%
=================================================================
Liabilities:
Interest-bearing demand and savings 1.14% 0.90% 0.82% 0.88% 0.92%
Time deposits 2.65% 2.55% 2.50% 2.70% 2.97%
-----------------------------------------------------------------
Total Bank issued deposits 1.79% 1.64% 1.58% 1.68% 1.87%
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Wholesale deposits 2.96% 2.77% 2.71% 2.80% 3.11%
Short-term borrowings 2.39% 2.32% 2.07% 2.09% 2.02%
Long-term borrowings 5.62% 5.10% 4.98% 5.25% 4.45%
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Total interest-bearing liabilities 2.22% 2.09% 1.99% 2.07% 2.19%
=================================================================
Net interest spread 3.32% 3.29% 3.35% 3.40% 3.35%
Net interest margin (FTE) 3.58% 3.53% 3.60% 3.65% 3.62%
=================================================================
FTE adjustment (000's) $ 1,170 $ 1,107 $ 1,013 $ 1,037 $ 1,130