AMCORE Financial, Inc. Reports 1st Quarter Loss

ROCKFORD, Ill., April 17 /PRNewswire-FirstCall/ --

(Numbers in Thousands, Except Per Share Data)

1st quarter 2008 1st quarter 2007 4th quarter 2007
Net Revenues $54,583 $59,776 $57,243
Net Income (Loss) ($27,459) $8,219 $7,530
Diluted Shares 21,952 23,804 22,175
Diluted EPS ($1.25) $0.35 $0.34

AMCORE Financial, Inc. (Nasdaq: AMFI) announced today a net loss for the
first quarter 2008 of $27.5 million, a decrease from net income of $8.2
million in the prior-year period and $7.5 million in the previous quarter. The
loss per diluted share for first quarter 2008 was $1.25, a decrease from
earnings of $0.35 per diluted share in first quarter 2007, and $0.34 in the
previous quarter.
"AMCORE, like most banks with a commercial real estate concentration,
experienced rapidly growing non-performing loans in the first quarter. The
weakness related primarily to builders and developers, as well as broader
commercial real estate," said William R. McManaman, CEO of AMCORE.
"We clearly recognize this is a very difficult environment for banks.
Consequently, we have begun a process of evaluating our disciplines around our
lending practices and have already implemented many improvements. We intend to
further this process with the advice of independent advisors in order to
establish a more disciplined execution environment and to respond to the
recommendations of bank regulators. This process has commenced and will be
completed before year-end."
"AMCORE remains well capitalized, with adequate liquidity and has a strong
deposit base throughout a solid market footprint," stated Mr. McManaman.
Headlines
-- Net interest income was $36.7 million, or 3.12 percent, of average
earning assets in first quarter 2008 compared to $40.4 million, or 3.38
percent, in first quarter 2007, and $39.1 million, or 3.28 percent, of
average earning assets in fourth quarter 2007.
-- Average loan balances decreased one percent, or $33.7 million, to $3.9
billion compared to first quarter 2007, while average investment
securities declined three percent, or $22.8 million. Average bank
issued deposits decreased five percent, or $178.0 million, to $3.3
billion compared to the first quarter 2007.
-- Provision for loan losses was $57.2 million, a $54.1 million increase
from $3.2 million in first quarter 2007 and a $50.8 increase from $6.4
million in fourth quarter 2007.
-- Net charge-offs were $13.6 million, or 1.40 percent of average loans
on an annualized basis, compared to $2.8 million and 0.28 percent in
first quarter 2007, and $4.8 million and 0.48 percent in fourth
quarter 2007, respectively.
-- Non-performing loans were $114 million, compared to $37 million at
March 31, 2007 and $71 million at December 31, 2007. Non-performing
loans include $113 million of non-accrual loans and $1 million of
loans 90 days past due and still accruing.
-- Non-interest income decreased $1.5 million compared to first quarter
2007 and $245,000 compared to fourth quarter 2007.
-- Operating expenses remained flat compared to first quarter 2007, but
increased $4.2 million compared to fourth quarter 2007.

Revenues
Net revenues decreased $5.2 million to $54.6 million in first quarter 2008
from $59.8 million during the same quarter a year ago and $2.7 million from
$57.2 million in the previous quarter. This was primarily due to stagnant net
loan growth and a decrease in non-interest income.
Net interest income decreased to $36.7 million in first quarter 2008 from
$40.4 million during the same quarter a year ago, and $39.1 million in fourth
quarter 2007. The net interest margin decreased 26 basis points to 3.12
percent in first quarter 2008 from 3.38 percent in first quarter 2007, and
decreased 16 basis points compared to fourth quarter 2007. Components
contributing to the decrease included: the cost of funding the increased pool
of non-accrual loans; a write down of nearly $800,000 of interest income from
loans that were moved to non-accrual status during the quarter; and a seasonal
reduction in bank-issued deposits.
Total non-interest income decreased $1.5 million compared to first quarter
2007 and decreased $245,000 compared to fourth quarter 2007. The first quarter
2008 amount included $1.01 million gain related to a distribution as a member
of the VISA, Inc. organization and compares to a $2.4 million gain on the sale
of the Originated Mortgage Servicing Rights portfolio in first quarter 2007.
Operating Expenses
Total operating expenses remained flat compared to first quarter 2007, but
increased $4.2 million compared to fourth quarter 2007. Expenses in first
quarter 2008 included a $3.1 million expense relating to unfunded loan
commitments and $1.7 million in charges related to executive retirement and
other severance costs.
Operating expenses in first quarter 2007 included personnel costs of $1.4
million relating to separation costs for mortgage servicing employees, an
executive officer resignation, and a director's supplemental retirement plan
close out, and $2.3 million debt extinguishment expenses from a trust
preferred securities redemption. Net occupancy and equipment expenses
increased $526,000 in first quarter 2008 compared to first quarter 2007
primarily due to branch expansion, and were essentially offset by lower
advertising and business development costs.
In first quarter 2008, AMCORE opened two branches in the suburban Chicago
communities of Mt. Prospect and Wheaton.
Asset Quality & Loan Loss
The percentage of total non-performing assets to total assets was 2.25
percent at March 31, 2008, up from 0.73 percent at March 31, 2007 and 1.45
percent at December 31, 2007. AMCORE's loan portfolio has been heavily
concentrated in commercial real estate, specifically in construction and land
development loans and non-residential commercial real estate loans.
Construction and land development loans represent about 24 percent of total
commercial loans outstanding and 19 percent of total loans. Of the specific
allocations made in provision levels, 69 percent are from this portfolio.
Loans 90 days past due and still accruing decreased $5.7 million compared
to first quarter 2007, and $28.7 million compared to the previous quarter.
Net charge-offs were $13.6 million, an increase of $10.9 million from
first quarter 2007 and an increase of $8.9 million from fourth quarter 2007.
Net charge-offs were 140 basis points of average loans on an annualized basis
during first quarter 2008, compared to 28 basis points for first quarter 2007
and 48 basis points for fourth quarter 2007. The charged-off amounts during
the quarter are primarily residential real estate development loans and
commercial investment properties.
Provision for loan losses was $57.2 million, a $54.1 million increase from
$3.2 million in first quarter 2007 and a $50.8 increase from $6.4 million in
fourth quarter 2007, due to weakening in the residential and commercial real
estate market. An additional $3.1 million reserve relating to unfunded loan
commitments was recorded during the quarter and is reflected in the other
category of operating expenses.
Regulatory and Compliance Update
On March 11, 2008, the Office of the Comptroller of the Currency (OCC)
notified the Bank of its intent to enter into a written agreement to formalize
the Bank's commitment to address weaknesses in the Bank's commercial lending
area. The terms of such agreement will likely include requirements for the
Bank to improve credit underwriting and administration practices, among other
things.
On April 14, 2008, the Company was notified by the OCC that the OCC has
terminated the Consent Order issued on August 10, 2006, regarding the Bank
Secrecy Act compliance program and the Formal Agreement issued on May 31, 2005
regarding the Bank's consumer compliance program. "This is excellent news and
demonstrates our Company's commitment to compliance," said Mr. McManaman.
Share Repurchase
The Company did not repurchase any shares during the quarter. The current
authorization expires on May 3, 2008.
Additional financial data for the Company's earnings call will be
available in the presentation section of the Investor Relations page on the
Company's website at www.AMCORE.com.
AMCORE Financial, Inc. is headquartered in Northern Illinois and has
banking assets of $5.2 billion with 80 locations in Illinois and Wisconsin.
AMCORE provides a full range of consumer and commercial banking services, a
variety of mortgage lending products and wealth management services including
trust, brokerage, private banking, financial planning, investment management,
insurance and comprehensive retirement plan services.
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 or adverse findings or rulings
made by local, state or federal regulators or agencies regarding AMCORE and
its operations; (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 prepayments; (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.

AMCORE Financial, Inc.
CONSOLIDATED FINANCIAL SUMMARY
(Unaudited)

($ in 000's except per share data) 1st Qtr. 4th Qtr. 3rd Qtr.
SHARE DATA 2008 2007 2007
Diluted earnings per share: $(1.25) $0.34 $0.08
Cash dividends $0.185 $0.185 $0.185
Book value $15.67 $16.80 $16.76
Average diluted shares outstanding 21,952 22,175 22,657
Ending shares outstanding 21,953 21,940 22,480

INCOME STATEMENT
Total Interest Income $75,801 $83,865 $87,592
Total Interest Expense 39,117 44,766 47,221
Net interest income 36,684 39,099 40,371

Provision for loan losses 57,229 6,400 15,281

Non-interest income:
Investment management & trust 4,307 4,495 4,519
Service charges on deposits 7,334 8,001 7,852
Net mortgage revenues 345 191 234
Company owned life insurance 1,236 1,481 1,747
Brokerage commission 1,313 1,013 1,107
Bankcard fee income 2,005 2,060 1,995
Gain on sale of loans - 1 -
Net security (losses) gains 1,010 (346) (5,574)
Other 349 1,248 2,145
Total non-interest income 17,899 18,144 14,025

Operating expenses:
Personnel costs 24,374 22,278 22,188
Net occupancy & equipment 6,842 6,280 6,167
Data processing 915 884 843
Professional fees 2,383 2,061 2,503
Communication 1,259 1,280 1,385
Advertising & business development 708 1,400 794
Other 8,418 6,566 5,180
Total operating expenses 44,899 40,749 39,060

Income before income taxes (47,545) 10,094 55
Income tax (benefit) expense (20,086) 2,564 (1,834)
Net Income $(27,459) $7,530 $1,889

1st Qtr. 4th Qtr. 3rd Qtr.
KEY RATIOS AND DATA 2008 2007 2007

Net interest margin (FTE) 3.12% 3.28% 3.35%

Return on average assets -2.13% 0.58% 0.14%
Return on average equity -29.44% 7.94% 1.97%
Efficiency ratio 82.26% 71.19% 71.81%
Equity/assets (end of period) 6.64% 7.10% 7.16%

Allowance to loans (end of period) 2.48% 1.35% 1.31%
Allowance to non-accrual loans 86% 130% 187%
Allowance to non-performing loans 85% 75% 125%
Non-accrual loans to loans 2.89% 1.04% 0.70%
Non-performing assets to total
assets 2.25% 1.45% 0.89%

($ in millions)
Total assets under administration $2,712 $2,728 $2,789
Mortgage loans closed $74 $51 $64
Mortgage servicing rights, net $0.1 $0.1 $0.1

($ in 000's except per share data)
2nd Qtr. 1st Qtr. 1Q/4Q 1Q 08/07
SHARE DATA 2007 2007 Inc(Dec) Inc(Dec)
Diluted earnings per share: $0.46 $0.35 (468%) (457%)
Cash dividends $0.185 $0.185 0% 0%
Book value $16.58 $16.89 (7%) (7%)
Average diluted shares
outstanding 23,098 23,804 (1%) (8%)
Ending shares outstanding 22,922 23,507 0% (7%)

INCOME STATEMENT

Total Interest Income $86,817 $85,742 (10%) (12%)
Total Interest Expense 46,099 45,346 (13%) (14%)
Net interest income 40,718 40,396 (6%) (9%)

Provision for loan losses 4,227 3,179 794% 1700%

Non-interest income:
Investment management
& trust 3,671 4,080 (4%) 6%
Service charges on
deposits 7,436 6,329 (8%) 16%
Net mortgage revenues 509 859 81% (60%)
Company owned life
insurance 1,247 954 (17%) 30%
Brokerage commission 1,191 863 30% 52%
Bankcard fee income 1,947 1,860 (3%) 8%
Gain on sale of loans 1 241 N/M N/M
Net security (losses) gains - - (392%) 0%
Other 3,446 4,194 (72%) (92%)
Total non-interest income 19,448 19,380 (1%) (8%)

Operating expenses:
Personnel costs 23,998 26,460 9% (8%)
Net occupancy & equipment 5,852 6,316 9% 8%
Data processing 955 687 4% 33%
Professional fees 1,904 1,929 16% 24%
Communication 1,270 1,323 (2%) (5%)
Advertising & business
development 835 1,137 (49%) (38%)
Other 5,734 7,130 28% 18%
Total operating expenses 40,548 44,982 10% (0%)

Income before income taxes 15,391 11,615 N/M (509%)
Income tax (benefit)
expense 4,788 3,396 (883%) (691%)
Net Income $10,603 $8,219 (465%) (434%)

2nd Qtr. 1st Qtr. Basis Point Basis Point
KEY RATIOS AND DATA 2007 2007 Change Change

Net interest margin (FTE) 3.39% 3.38% (16) (26)

Return on average assets 0.81% 0.63% (271) (276)
Return on average equity 10.99% 8.34% (3738) (3778)
Efficiency ratio 67.39% 75.25% 1107 701
Equity/assets (end of
period) 7.17% 7.54% (46) (90)
Allowance to loans (end of
period) 1.01% 1.04% 113 144
Allowance to non-accrual
loans 133% 137% (4405) (5094)
Allowance to non-performing
loans 108% 112% 975 (2674)
Non-accrual loans to loans 0.76% 0.76% 185 213
Non-performing assets to
total assets 0.78% 0.73% 80 152

($ in millions)
Total assets under
administration $2,817 $2,711 (1%) 0%
Mortgage loans closed $87 $75 45% (1%)
Mortgage servicing rights,
net $1.2 $0.7 0% (86%)

N/M = not meaningful

AMCORE Financial, Inc.
CONSOLIDATED FINANCIAL SUMMARY (cont.)
(Unaudited)

($ in 000's) 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr.
AVERAGE BALANCE SHEET 2008 2007 2007 2007
Assets:
Investment securities,
at cost $874,672 $871,626 $860,426 $868,713
Short-term investments 5,472 6,856 4,814 3,584
Loans held for sale 8,565 6,653 8,514 13,477
Loans: Commercial 774,482 776,557 803,529 809,739
Commercial real
estate 2,346,154 2,358,906 2,382,397 2,389,201
Residential
real estate 473,545 488,532 491,982 495,046
Consumer 335,272 319,808 316,879 312,404
Total loans $3,929,453 $3,943,803 $3,994,787 $4,006,390
Total earning assets $4,818,162 $4,828,938 $4,868,541 $4,892,164

Allowance for loan losses (53,982) (52,499) (42,354) (43,069)
Goodwill 6,148 6,148 6,148 6,148
Other non-earning assets 404,324 412,641 414,042 410,019
Total assets $5,174,652 $5,195,228 $5,246,377 $5,265,262
Liabilities and Stockholders'
Equity:
Non-interest bearing
deposits $479,571 $496,301 $499,550 $502,813
Interest bearing deposits 1,824,232 1,873,883 1,809,846 1,786,600
Time deposits 994,795 1,067,981 1,130,992 1,161,978
Total bank issued
deposits $3,298,598 $3,438,165 $3,440,388 $3,451,391
Wholesale deposits 593,083 620,500 649,906 648,270
Short-term borrowings 485,708 327,678 294,584 323,911
Long-term borrowings 367,492 368,657 421,826 389,008
Total wholesale
funding $1,446,283 $1,316,835 $1,366,316 $1,361,189
Total interest bearing
liabilities 4,265,310 4,258,699 4,307,154 4,309,767
Other liabilities 54,695 64,144 55,994 65,784
Total liabilities $4,799,576 $4,819,144 $4,866,653 $4,878,364
Stockholders' equity 373,870 377,775 391,731 396,666
Other comprehensive loss 1,206 (1,691) (12,007) (9,768)
Total stockholders'
equity 375,076 376,084 379,724 386,898
Total liabilities &
stockholders' equity $5,174,652 $5,195,228 $5,246,377 $5,265,262

CREDIT QUALITY
Ending allowance for loan
losses $96,732 $53,140 $51,500 $40,714
Net charge-offs 13,636 4,760 4,495 4,821
Net charge-offs to avg loans
(annualized) 1.40% 0.48% 0.45% 0.48%
Non-performing assets:
Non-accrual loans $112,945 $40,972 $27,603 $30,683
Loans 90 days past
due & still accruing 1,107 29,826 13,571 7,024
Total non-performing
loans 114,052 70,798 41,174 37,707
Foreclosed real estate 2,422 4,108 5,251 3,553
Other foreclosed assets 246 201 236 164
Total non-performing
assets $116,720 $75,107 $46,661 $41,424

YIELD AND RATE ANALYSIS
Assets:
Investment securities (FTE) 4.71% 4.61% 4.56% 4.42%
Short-term investments 4.04% 5.31% 6.61% 6.27
Loans held for sale 6.54% 7.61% 6.51% 5.68%
Loans: Commercial 6.78% 7.80% 8.24% 8.27%
Commercial real estate 6.66% 7.42% 7.75% 7.76%
Residential real
estate 6.40% 6.94% 7.13% 7.03%
Consumer 7.93% 7.96% 7.76% 7.69%
Total loans (FTE) 6.76% 7.48% 7.77% 7.77%
Total interest earning
assets (FTE) 6.38% 6.96% 7.20% 7.17%
Liabilities:
Interest bearing deposits 2.42% 3.23% 3.44% 3.30%
Time deposits 4.36% 4.58% 4.70% 4.69%
Total bank issued deposits 3.11% 3.72% 3.92% 3.85%
Wholesale deposits 5.02% 5.11% 5.13% 5.11%
Short-term borrowings 4.02% 4.80% 5.08% 5.09%
Long-term borrowings 5.55% 5.63% 5.61% 5.62%
Total wholesale funding 4.82% 5.18% 5.27% 5.25%
Total interest bearing
liabilities 3.69% 4.17% 4.35% 4.29%
Net interest spread 2.69% 2.79% 2.85% 2.88%
Net interest margin (FTE) 3.12% 3.28% 3.35% 3.39%

FTE adjustment (000's) $746 $701 $657 $619

($ in 000's) 1st Qtr. 1Q/4Q 1Q 08/07 Ending
AVERAGE BALANCE SHEET 2007 Inc(Dec) Inc(Dec) Balances
Assets:
Investment securities,
at cost $897,511 0% (3%) $909,085
Short-term investments 19,127 (20%) (71%) 1,517
Loans held for sale 12,305 29% (30%) 9,286
Loans: Commercial 803,570 (0%) (4%) 783,176
Commercial
real estate 2,354,882 (1%) (0%) 2,336,499
Residential
real estate 498,427 (3%) (5%) 447,201
Consumer 306,268 5% 9% 336,166
Total loans $3,963,147 (0%) (1%) $3,903,042
Total earning assets $4,892,090 (0%) (2%) $4,822,930
Allowance for loan
losses (41,653) 3% 30% (96,732)
Goodwill 6,148 0% 0% 6,148
Other non-earning assets 399,135 (2%) 1% 444,176
Total assets $5,255,720 (0%) (2%) $5,176,522

Liabilities and Stockholders'
Equity:
Non-interest bearing
deposits $492,766 (3%) (3%) $489,695
Interest bearing deposits 1,784,489 (3%) 2% 1,899,839
Time deposits 1,199,365 (7%) (17%) 946,201
Total bank issued
deposits $3,476,620 (4%) (5%) $3,335,735
Wholesale deposits 746,629 (4%) (21%) 601,946
Short-term borrowings 157,511 48% 208% 495,116
Long-term borrowings 406,936 (0%) (10%) 343,872
Total wholesale
funding $1,311,076 10% 10% $1,440,934
Total interest bearing
liabilities 4,294,930 0% (1%) 4,286,974
Other liabilities 68,126 (15%) (20%) 55,915
Total liabilities $4,855,822 (0%) (1%) $4,832,584
Stockholders' equity 411,131 (1%) (9%) 341,141
Other comprehensive loss (11,233) (171%) (111%) 2,797
Total stockholders'
equity 399,898 (0%) (6%) 343,938
Total liabilities &
stockholders'
equity $5,255,720 (0%) (2%) $5,176,522

CREDIT QUALITY
Ending allowance for
loan losses $41,308 82% 134%
Net charge-offs 2,784 186% 390%
Net charge-offs to avg
loans (annualized) 0.28% 192% 400%
Non-performing assets:
Non-accrual loans $30,242 176% 273%
Loans 90 days past due &
still accruing 6,790 (96%) (84%)
Total non-performing
loans 37,032 61% 208%
Foreclosed real estate 1,205 (41%) 101%
Other foreclosed assets 231 22% 6%
Total non-performing
assets $38,468 55% 203%
YIELD AND RATE ANALYSIS
Assets:
Investment securities (FTE) 4.43%
Short-term investments 5.64%
Loans held for sale 4.86%
Loans: Commercial 8.23%
Commercial real estate 7.80%
Residential real
estate 7.05%
Consumer 7.53%
Total loans (FTE) 7.77%
Total interest earning
assets (FTE) 7.14%

Liabilities:
Interest bearing deposits 3.25%
Time deposits 4.65%
Total bank issued
deposits 3.82%
Wholesale deposits 5.16%
Short-term borrowings 4.85%
Long-term borrowings 5.85%
Total wholesale funding 5.34%
Total interest bearing
liabilities 4.28%
Net interest spread 2.86%
Net interest margin (FTE) 3.38%

FTE adjustment (000's) $608

SOURCE AMCORE Financial, Inc.

media, Katherine Taylor, Investor Relations Manager, +1-815-961-7164; or
financial, Judy Carre Sutfin, Executive Vice President and CFO,
+1-815-961-7081, both of AMCORE Financial, Inc.