AMCORE Financial, Inc. Reports First Quarter 2001 Earnings

Apr 18, 2001, 01:00 ET from AMCORE Financial, Inc.

    ROCKFORD, Ill., April 18 /PRNewswire/ -- AMCORE Financial, Inc.
 (Nasdaq: AMFI) reported earnings per share of $0.39 on net income of
 $10.2 million for the first quarter ending March 31, 2001.
     Earnings per share on a year-over-year basis were essentially flat, as the
 slowing economy and carry over impact of last year's unusual rate environment
 impacted net income. Net income declined $893,000 when compared to the first
 quarter of 2000 and was the result of lower margins, a $221 million decrease
 in average earning assets, and the cost of stock repurchases.
     "However, we made progress with our margins during the first quarter of
 2001 when compared to the prior quarter, yet they still remain below 2000
 levels," said Robert J. Meuleman, chairman and chief executive officer.  "In
 addition, the weakness in the equity markets as evidenced by the Nasdaq and
 the S&P 500 indexes has negatively impacted our trust and asset management
 income year over year."
 
     HIGHLIGHTS
     -- Diluted earnings per share in the first quarter were $0.39, compared to
        the $0.40 in the first quarter of 2000.
     -- The stock repurchase program, downsizing in the investment portfolio
        and a slowing economy resulted in net income decreasing 8 percent, or
        $893,000, to $10.2 million for the first quarter of 2001 compared to
        the same period a year ago.
     -- Net interest margin decreased 22 basis points to 3.22 percent from the
        same period a year ago, but increased 8 basis points up from
        3.14 percent in the fourth quarter of 2000.
     -- Increased emphasis on loan quality and use of a new loan pricing
        discipline resulted in a decrease of 6 percent, or $167 million in
        average loans, from the same period last year.
     -- Return on equity was 12.99 percent down from a record 15.63 percent in
        the first quarter of 2000 and 14.17 percent in the fourth quarter 2000.
     -- This reflects the lower earnings and a $30 million increase on average
        from March 31, 2000 in the value of securities available for sale.
     -- Operating expenses increased 3 percent, or $882,000, compared to the
        first quarter of 2000.
     -- Mortgage activity was very strong and resulted in $109 million in
        closed loans during the quarter, up $70 million from the same quarter a
        year ago. This was predominantly due to refinance activity, which also
        resulted in a mortgage servicing right impairment charges of
        approximately $300,000 taken during the quarter.
 
     EARNINGS SUMMARY
     "Having experienced a record 10 years of economic expansion in the U.S.
 economy, we have seen a slow down within sectors of our loan portfolio," said
 Meuleman.  "Through our reorganization process we have centralized our
 commercial credit underwriting and have enhanced control over the entire
 credit process and our pricing disciplines. This has caused a purposeful
 lowering of loans in the portfolio given the current economy."
     Since the first quarter of 2000, the Company has sold $118 million of
 indirect auto loans and securitized $52 million of 1 - 4 family mortgage
 loans, which has improved liquidity.  Excluding these deliberate actions,
 average loans would have been flat year over year.  For the first quarter of
 2001, the Company recorded $780,000 in non-interest income from the sale of
 auto loans.
     As part of an ongoing process to reduce interest rate risk and wholesale
 borrowings, AMCORE has continued to resize its investment portfolio.
 Excluding the securitized mortgages of $52 million, the Company has further
 reduced its investment portfolio by $145 million, on average, from the first
 quarter of 2000. "While this has the immediate impact of reducing our net
 interest income, we believe the reduction in our interest rate risk outweighs
 its earnings contribution," said Meuleman.  "This is a short term negative,
 but a significant positive for the long-term outlook."
     Net income for the first quarter was $10.2 million, an 8 percent decrease
 from $11.1 million in the first quarter of 2000.  Average earning assets
 decreased $221 million, or 5 percent, contributing to a $893,000 decrease in
 net income.  Average loans decreased 6 percent or $167 million to
 $2.6 billion.
     Net interest margin decreased 22 basis points to 3.22 percent from the
 same period a year ago but increased 8 basis points from the fourth quarter of
 2000.  "Our margins are improving in the current rate environment and also
 reflect significant reductions in our wholesale borrowing, which has lowered
 our cost of funds," said Meuleman.  Total average wholesale funding has been
 reduced by $179 million from the first quarter of 2000.  "We've also
 introduced a free checking product in the first quarter as a means of
 attracting low cost deposits."
     "In total, these balance sheet restructuring actions are intended to
 improve the predictability and quality of future earnings," said Meuleman.
     Trust and asset management revenues decreased $840,000, or 11 percent, in
 the first quarter of 2001 from $7.6 million in the first quarter of 2000.
 "The overall decline in the stock market over recent months has impacted our
 asset management business, particularly equity values upon which our fees are
 based," said Meuleman.
     "We are not unique in this respect, but the composition of our managed
 assets is evenly divided between equity, fixed income and money market
 investments.  Therefore, when one sector is experiencing pressure, as the
 equity markets have been recently, other sectors can lessen the impact.  For
 comparison purposes, the S&P 500 and the Nasdaq were down nearly 22 percent
 and 60 percent, respectively, from the first quarter of 2000 to the first
 quarter of 2001, yet the Lehman Aggregate bond index was up nearly 13 percent.
 Because of favorable outcomes in the fixed income market, our decrease in net
 income was limited to 11 percent," said Meuleman.
     Mortgage revenues were up 144%, or $1.4 million, primarily due to
 refinancing activity.  During the first quarter of 2001, the Company took a
 charge to reflect a decrease of servicing rights of approximately $300,000,
 which is the result of higher refinancing activity.  During the first quarter
 of 2001, mortgage volume was already at 50 percent of the total volume for the
 previous year.  "We've been successful in capturing a significant portion of
 the refinancing business in our markets because of the strong name recognition
 of our mortgage company and our scalable processing systems that allows us to
 efficiently take on an increase in volume when opportunities arise."
     Total operating expenses increased only 3 percent from a year ago to
 $30.6 million.  The increase was primarily due to increases in refinancing
 volume, higher occupancy costs primarily due to increases in fuel prices,
 higher credit related costs and higher health care costs.
     "Like many other companies have experienced, our healthcare costs began
 running significantly higher during the second half of 2000 and we expect the
 increase to moderate in the upcoming quarter due to structural changes in the
 plan and other cost containment activities," said Meuleman.
 
     ASSET QUALITY AND RESERVES
     The allowance for loan losses to ending loans increased to 1.15 percent at
 March 31, 2001 from 1.05 percent at March 31, 2000.  Reserve coverage of non-
 performing loans decreased to 93 percent at March 31, 2001 down from 131
 percent at March 31, 2000.  Total non-performing assets at March 31, 2001 were
 $35.6 million, or 0.85 percent of total assets.  Net charge-offs represented
 24 basis points annualized of average loans for the first quarter compared to
 23 basis points in the first quarter of 2000 and 26 basis points in the fourth
 quarter of 2000.
     "About $9 million of the total increase in non-performing loans is due to
 three unrelated credits that were added to non-performing loans during the
 quarter," said Meuleman.  "Two were previously disclosed in the Company's
 Annual Report and Form 10K.  These are three diverse credits that are not tied
 to any one industry."
 
     OUTLOOK
     "The first quarter of 2001 was within our expectations when taking into
 account the slow down in the economy and carryover impact of the inverted
 yield curve from the previous year," said Meuleman. "Going forward we expect
 to see the margin improvement that began in the first quarter accelerate as
 the interest rate environment improves.  We expect our margin for the full
 year to be within the 3.40 to 3.45 percent range.
     "We expect our performance in the latter half of the year to outpace the
 first half of the year and we believe our yearly earnings per share target
 should come within the range of $1.65 to $1.70.  Our operating expenses are
 expected to be up only 3.5 percent for the full year and our trust and asset
 management revenues should be down only 7 to 8 percent compared to 2000."
     As previously announced, the Company has reached definitive agreements for
 the sale of its Ashton, Rochelle, Mt. Morris, Aledo, Sheffield and Wyanet
 branches and continues to pursue the sale of its Gridley branch.  Combined the
 seven branches represent approximately $75.8 million in loans and other assets
 and $176.0 million in deposits.  AMCORE expects the branch sales will result
 in gains individually and in total.
     AMCORE Financial, Inc. is the bank distinguished by high performance asset
 management and the delivery of tailored products to business customers in
 selected high growth Midwestern markets.  The Company is headquartered in
 northern Illinois with investment assets under administration of $4.8 billion
 and banking assets of $4.2 billion with 65 locations in Illinois and
 Wisconsin.
     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, investment 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) loss of key executives or personnel; (VI) changes in
 interest rates including the effect of prepayment; (VII) general economic and
 business conditions which are less favorable than expected; (VIII) equity and
 fixed income market fluctuations; (IX) unanticipated changes in industry
 trends; (X) unanticipated changes in credit quality and risk factors; (XI)
 success in gaining regulatory approvals when required; (XII) changes in
 Federal Reserve Board monetary policies; (XIII) 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; and (XVI) inability of third-party vendors to perform critical
 services to the company or its customers.
 
     AMCORE common stock is listed on The Nasdaq Stock Market under the symbol
 "AMFI." Further information about AMCORE Financial, Inc. can be found at the
 company's website at http://www.AMCORE.com and at www.VintageFunds.com .
 
 

SOURCE AMCORE Financial, Inc.
    ROCKFORD, Ill., April 18 /PRNewswire/ -- AMCORE Financial, Inc.
 (Nasdaq: AMFI) reported earnings per share of $0.39 on net income of
 $10.2 million for the first quarter ending March 31, 2001.
     Earnings per share on a year-over-year basis were essentially flat, as the
 slowing economy and carry over impact of last year's unusual rate environment
 impacted net income. Net income declined $893,000 when compared to the first
 quarter of 2000 and was the result of lower margins, a $221 million decrease
 in average earning assets, and the cost of stock repurchases.
     "However, we made progress with our margins during the first quarter of
 2001 when compared to the prior quarter, yet they still remain below 2000
 levels," said Robert J. Meuleman, chairman and chief executive officer.  "In
 addition, the weakness in the equity markets as evidenced by the Nasdaq and
 the S&P 500 indexes has negatively impacted our trust and asset management
 income year over year."
 
     HIGHLIGHTS
     -- Diluted earnings per share in the first quarter were $0.39, compared to
        the $0.40 in the first quarter of 2000.
     -- The stock repurchase program, downsizing in the investment portfolio
        and a slowing economy resulted in net income decreasing 8 percent, or
        $893,000, to $10.2 million for the first quarter of 2001 compared to
        the same period a year ago.
     -- Net interest margin decreased 22 basis points to 3.22 percent from the
        same period a year ago, but increased 8 basis points up from
        3.14 percent in the fourth quarter of 2000.
     -- Increased emphasis on loan quality and use of a new loan pricing
        discipline resulted in a decrease of 6 percent, or $167 million in
        average loans, from the same period last year.
     -- Return on equity was 12.99 percent down from a record 15.63 percent in
        the first quarter of 2000 and 14.17 percent in the fourth quarter 2000.
     -- This reflects the lower earnings and a $30 million increase on average
        from March 31, 2000 in the value of securities available for sale.
     -- Operating expenses increased 3 percent, or $882,000, compared to the
        first quarter of 2000.
     -- Mortgage activity was very strong and resulted in $109 million in
        closed loans during the quarter, up $70 million from the same quarter a
        year ago. This was predominantly due to refinance activity, which also
        resulted in a mortgage servicing right impairment charges of
        approximately $300,000 taken during the quarter.
 
     EARNINGS SUMMARY
     "Having experienced a record 10 years of economic expansion in the U.S.
 economy, we have seen a slow down within sectors of our loan portfolio," said
 Meuleman.  "Through our reorganization process we have centralized our
 commercial credit underwriting and have enhanced control over the entire
 credit process and our pricing disciplines. This has caused a purposeful
 lowering of loans in the portfolio given the current economy."
     Since the first quarter of 2000, the Company has sold $118 million of
 indirect auto loans and securitized $52 million of 1 - 4 family mortgage
 loans, which has improved liquidity.  Excluding these deliberate actions,
 average loans would have been flat year over year.  For the first quarter of
 2001, the Company recorded $780,000 in non-interest income from the sale of
 auto loans.
     As part of an ongoing process to reduce interest rate risk and wholesale
 borrowings, AMCORE has continued to resize its investment portfolio.
 Excluding the securitized mortgages of $52 million, the Company has further
 reduced its investment portfolio by $145 million, on average, from the first
 quarter of 2000. "While this has the immediate impact of reducing our net
 interest income, we believe the reduction in our interest rate risk outweighs
 its earnings contribution," said Meuleman.  "This is a short term negative,
 but a significant positive for the long-term outlook."
     Net income for the first quarter was $10.2 million, an 8 percent decrease
 from $11.1 million in the first quarter of 2000.  Average earning assets
 decreased $221 million, or 5 percent, contributing to a $893,000 decrease in
 net income.  Average loans decreased 6 percent or $167 million to
 $2.6 billion.
     Net interest margin decreased 22 basis points to 3.22 percent from the
 same period a year ago but increased 8 basis points from the fourth quarter of
 2000.  "Our margins are improving in the current rate environment and also
 reflect significant reductions in our wholesale borrowing, which has lowered
 our cost of funds," said Meuleman.  Total average wholesale funding has been
 reduced by $179 million from the first quarter of 2000.  "We've also
 introduced a free checking product in the first quarter as a means of
 attracting low cost deposits."
     "In total, these balance sheet restructuring actions are intended to
 improve the predictability and quality of future earnings," said Meuleman.
     Trust and asset management revenues decreased $840,000, or 11 percent, in
 the first quarter of 2001 from $7.6 million in the first quarter of 2000.
 "The overall decline in the stock market over recent months has impacted our
 asset management business, particularly equity values upon which our fees are
 based," said Meuleman.
     "We are not unique in this respect, but the composition of our managed
 assets is evenly divided between equity, fixed income and money market
 investments.  Therefore, when one sector is experiencing pressure, as the
 equity markets have been recently, other sectors can lessen the impact.  For
 comparison purposes, the S&P 500 and the Nasdaq were down nearly 22 percent
 and 60 percent, respectively, from the first quarter of 2000 to the first
 quarter of 2001, yet the Lehman Aggregate bond index was up nearly 13 percent.
 Because of favorable outcomes in the fixed income market, our decrease in net
 income was limited to 11 percent," said Meuleman.
     Mortgage revenues were up 144%, or $1.4 million, primarily due to
 refinancing activity.  During the first quarter of 2001, the Company took a
 charge to reflect a decrease of servicing rights of approximately $300,000,
 which is the result of higher refinancing activity.  During the first quarter
 of 2001, mortgage volume was already at 50 percent of the total volume for the
 previous year.  "We've been successful in capturing a significant portion of
 the refinancing business in our markets because of the strong name recognition
 of our mortgage company and our scalable processing systems that allows us to
 efficiently take on an increase in volume when opportunities arise."
     Total operating expenses increased only 3 percent from a year ago to
 $30.6 million.  The increase was primarily due to increases in refinancing
 volume, higher occupancy costs primarily due to increases in fuel prices,
 higher credit related costs and higher health care costs.
     "Like many other companies have experienced, our healthcare costs began
 running significantly higher during the second half of 2000 and we expect the
 increase to moderate in the upcoming quarter due to structural changes in the
 plan and other cost containment activities," said Meuleman.
 
     ASSET QUALITY AND RESERVES
     The allowance for loan losses to ending loans increased to 1.15 percent at
 March 31, 2001 from 1.05 percent at March 31, 2000.  Reserve coverage of non-
 performing loans decreased to 93 percent at March 31, 2001 down from 131
 percent at March 31, 2000.  Total non-performing assets at March 31, 2001 were
 $35.6 million, or 0.85 percent of total assets.  Net charge-offs represented
 24 basis points annualized of average loans for the first quarter compared to
 23 basis points in the first quarter of 2000 and 26 basis points in the fourth
 quarter of 2000.
     "About $9 million of the total increase in non-performing loans is due to
 three unrelated credits that were added to non-performing loans during the
 quarter," said Meuleman.  "Two were previously disclosed in the Company's
 Annual Report and Form 10K.  These are three diverse credits that are not tied
 to any one industry."
 
     OUTLOOK
     "The first quarter of 2001 was within our expectations when taking into
 account the slow down in the economy and carryover impact of the inverted
 yield curve from the previous year," said Meuleman. "Going forward we expect
 to see the margin improvement that began in the first quarter accelerate as
 the interest rate environment improves.  We expect our margin for the full
 year to be within the 3.40 to 3.45 percent range.
     "We expect our performance in the latter half of the year to outpace the
 first half of the year and we believe our yearly earnings per share target
 should come within the range of $1.65 to $1.70.  Our operating expenses are
 expected to be up only 3.5 percent for the full year and our trust and asset
 management revenues should be down only 7 to 8 percent compared to 2000."
     As previously announced, the Company has reached definitive agreements for
 the sale of its Ashton, Rochelle, Mt. Morris, Aledo, Sheffield and Wyanet
 branches and continues to pursue the sale of its Gridley branch.  Combined the
 seven branches represent approximately $75.8 million in loans and other assets
 and $176.0 million in deposits.  AMCORE expects the branch sales will result
 in gains individually and in total.
     AMCORE Financial, Inc. is the bank distinguished by high performance asset
 management and the delivery of tailored products to business customers in
 selected high growth Midwestern markets.  The Company is headquartered in
 northern Illinois with investment assets under administration of $4.8 billion
 and banking assets of $4.2 billion with 65 locations in Illinois and
 Wisconsin.
     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, investment 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) loss of key executives or personnel; (VI) changes in
 interest rates including the effect of prepayment; (VII) general economic and
 business conditions which are less favorable than expected; (VIII) equity and
 fixed income market fluctuations; (IX) unanticipated changes in industry
 trends; (X) unanticipated changes in credit quality and risk factors; (XI)
 success in gaining regulatory approvals when required; (XII) changes in
 Federal Reserve Board monetary policies; (XIII) 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; and (XVI) inability of third-party vendors to perform critical
 services to the company or its customers.
 
     AMCORE common stock is listed on The Nasdaq Stock Market under the symbol
 "AMFI." Further information about AMCORE Financial, Inc. can be found at the
 company's website at http://www.AMCORE.com and at www.VintageFunds.com .
 
 SOURCE  AMCORE Financial, Inc.