After two quarters of surprising analysts with huge losses, Amcore Financial Inc. of Rockford, Ill., said its loan problems show signs of stabilizing, but it would not say how soon it might become profitable again.
Though the $5.2 billion-asset company stressed that it is well capitalized, one analyst said it likely would need to raise more capital in the near term.
Amcore, which has been swamped by bad construction and land development loans, would not make predictions about upcoming quarterly results, saying it is too difficult to determine where the economy is headed.
"The only guys who have worse accuracy statistics than weathermen are economic forecasters," Don Wilson, the company's president and chief operating officer, said in an interview Thursday.
Amcore lost $20.2 million in the second quarter, after posting a $27.5 million first-quarter loss. It put nearly $100 million into its loan-loss provision over the two quarters, because of a surge in nonperforming loans.
Analysts, who had expected a modest profit in both quarters, said they remain optimistic that Amcore will start to rebound in the second half.
But they disagreed over whether its capital — which had been bolstered by $150 million from three capital raises over the past 18 months — would hold up.
Stephen Geyen, an analyst at Stifel, Nicolaus & Co., said in a research note that Amcore's tangible equity ratio of 6.06% seems "adequate" given the lack of growth on the balance sheet.
But a research note from KBW Inc.'s Keefe, Bruyette & Woods Inc. called the capital levels and the reserve coverage, at 78% of nonperformers, below "comfort range" and said a capital raise was likely.
Mr. Wilson said Amcore is doing everything from shrinking its balance sheet to lowering salary expenses to maintain capital. This month it expects to close on the sale of $80 million worth of nonperforming and underperforming loans.
"We are paying very close attention to our capital ratios to make sure that we do not have a problem," Mr. Wilson said.
In the second quarter Amcore's loan-loss provision jumped more than eightfold from a year earlier, to $40 million. But that was 30% less than the first quarter's $57.2 million provision.
Nonperforming loans rose 50% compared with the first quarter, to $171.8 million.
Also contributing to the quarterly loss was a $6.1 million charge for goodwill impairment, since Amcore's stock is trading below book value.
The shares, which have lost about 84% of their value in the past year, were trading at $4.70 late Friday afternoon, as they rebounded from a 5% drop on Thursday after the earnings announcement.
"I was looking for modest earnings and it came in with a loss," said Brian Martin, an analyst at Howe Barnes Hoefer & Arnett Inc. "And the magnitude was surprising."
But, he said, "A loss this big may mean better things in the second half."
There is also some indication that troubled loans are slowing, Judy Carre Sutfin, Amcore's executive vice president and chief financial officer, said on the company's conference call Thursday. Delinquencies fell 12% from the previous quarter.
Also Thursday, Amcore announced that Steven F. Gersch had succeeded Melvin H. Buser as its chief credit officer. Mr. Buser, who had held the post since 2001, retired.
Amcore has had a string of management changes recently. William R. McManaman took over for its longtime chairman and CEO Kenneth E. Edge, who retired in February.
