| Copyright: | Business Wire | | Source: | Business Wire | | Wordcount: | 624 |
CHICAGO--(BUSINESS WIRE)--July 2, 2007--Fitch Ratings has downgraded the ratings of AMCORE Financial, Inc. (Nasdaq:AMFI) and its subsidiary AMCORE Bank, N.A., including the long-term Issuer Default Rating (IDR), which has been lowered to 'BBB-' from 'BBB.' The Support Rating Floor remains unchanged at 'NF' (no floor). The Rating Outlook is Stable. A complete list of ratings is included at the end of this release.
The lowering of AMFI's ratings is driven by the lack of improvement in the company's core earnings performance through 2006 and the first quarter of 2007. Since 2000, the company's earnings performance, as measured by return on assets (ROA), has been trending downward and ROAs in 2006 and the first quarter of 2007 were below similarly rated peers. AMFI's earnings remain pressured due to the operating expenses associated with its branch expansion strategy, continued margin pressure due to a difficult yield curve environment, and competitive demands on both sides of the balance sheet.
AMFI's ratings and Stable Outlook consider the bank's good funding profile, average consolidated capital position, and stabilized asset quality metrics. The funding profile is sound with a reasonable reliance on wholesale sources. Rockford and other community bank markets continue to generate much of AMFI's core deposit funding, while the Chicago suburbs predominantly fuel the company's overall loan growth. AMFI's approach to managing its capital has become more active in 2006 and 1Q07 with higher levels of share repurchases. Nonetheless, AMFI's level of tangible common equity to tangible assets at March 31, 2007 continues to exceed similarly-rated peers and has remained fairly constant over the last several years. Lastly, asset quality appears to have stabilized from peaks in nonperforming assets (NPAs) in 2001 through 2003, despite a recent uptick in NPAs in 2H06.
Somewhat constraining AMFI's ratings are its high commercial real estate concentration, potential parent company liquidity concerns, tight bank regulatory capital levels, and challenges posed by two regulatory actions. At March 31, 2007, commercial real estate loans represented 485% of common equity. Emphasis of commercial and industrial lending, one of AMFI's current strategies, may reduce this concentration over time. Given the company's slightly elevated NPA levels, Fitch will continue to monitor AMFI's asset quality closely. Parent liquidity has improved somewhat recently with a higher level of liquid assets at the holding company. However, a recently announced two million share repurchase authorization could pressure parent liquidity. AMCORE Bank, N.A. was well-capitalized at March 31, 2007, but its total risk-based capital ratio of 10.67% does not afford the company much excess capital above well-capitalized regulatory guidelines. The company continues to face challenges posed by the 2005 consumer compliance-related written agreement and the 2006 BSA/AML-related consent order with bank regulatory agencies.
Fitch downgrades the following ratings:
AMCORE Financial, Inc.
--Issuer Default Rating (IDR) to 'BBB-' from 'BBB';
--Short-term IDR to 'F3' from 'F2';
AMCORE Bank, N.A.
--Issuer Default Rating (IDR) 'BBB-' from 'BBB';
--Short-term IDR to 'F3' from 'F2';
--Long-term deposits to 'BBB' from 'BBB+'.
The Rating Outlook is Stable.
In addition, Fitch affirms the following:
AMCORE Financial Inc.
--Individual affirmed at 'B/C';
--Support affirmed at '5';
--Support floor remains at 'NF'.
AMCORE Bank, N.A.
--Individual affirmed at 'B/C';
--Support affirmed at '5';
--Short-term deposits affirmed at 'F2';
--Support floor remains at 'NF'.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
CONTACT: Fitch Ratings, Chicago Julie Solar, 312-368-5472 Doris Hoffmann, 312-368-2057 or Media Relations: Kenneth Reed, 212-908-0540, New York
This is a news service of Thomson Business Intelligence Service ©2006. This content is for your personal use only, subject to Terms and Conditions. No redistribution allowed.
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