AMCORE Outsources Servicing in Bid to Limit Risk
AMCORE Financial's earnings per share fell to $0.35 for the first quarter of this year, down 16% from the same period last year, as the company transitioned out of loan servicing operations.
The company reported net income of $8.2 million, down 21% from the prior-year period.
The company's CEO, Kenneth Edge, said AMCORE took a number of steps to improve performance and reduce risk during the first quarter, but that these reforms actually increased expenses during the period.
Nonrecurring first-quarter charges included a $2.3 million debt extinguishment expense on the redemption of $40 million in trust-preferred securities. Additionally, AMCORE posted a $1.3 million employment-related expense that included separation costs for mortgage servicing employees.
In January, AMCORE entered into an arrangement with another company to provide private-label mortgage loan processing and servicing on its portfolio. This arrangement, which included the sale of originated mortgage servicing rights, is designed to position the company for future mortgage origination growth and provide more stability for its mortgage earnings.
The company reported $74 million in first-quarter 2007 mortgage closings, down from $80 million in the year-earlier period.
Other costs included $443,000 for external consultants to improve compliance programs.
On the plus side, AMCORE posted a $2.4 million net gain on the sale of mortgage servicing rights on loans it had originated.
The company said non-interest income rose 23%, or $3.7 million, from the first quarter of last year. That reflected in part the gains from the servicing sale.
The company's average loan balances grew 5%, or $204 million, and its net interest margin declined by six basis points to 3.38%.
Nonperforming loans increased 40% from a year earlier, or by $10.2 million. Net charge-offs rose by a similar amount.
AMCORE Financial has assets totaling $5.3 billion and 78 banking locations in Illinois and Wisconsin. The company had nearly $500 million of residential real estate loans on its books at the end of the first quarter. (c) 2007 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com http://www.sourcemedia.com